Breaking! Federal Reserve officials warn: AI expectations are driving up interest rates, and if they fall short, it could lead to stagflation — how much longer can your $BTC hold up?

The Chair of the Chicago Fed, Goolsbee, personally tore apart the narrative of “AI-driven rate cuts” pushed by the Trump administration and Fed nominee Waller at a conference at Stanford’s Hoover Institution. He directly pointed to the core issue: the market’s widespread expectations of AI productivity gains are themselves pushing up interest rates. Once the technological dividends fall short, the result could be worse—stagflation.

Goolsbee cited survey data from the Chicago Fed, showing that economists, tech workers, and the general public all expect to gain about one percentage point of productivity growth annually over the next decade. This widespread expectation, paradoxically, poses a risk of overheating the economy. He warned: “The bigger the hype, the greater the hidden dangers.”

This statement directly challenges Waller and Bostick’s logic. Waller is expected to be approved as the 17th Fed Chair on Monday; he has repeatedly claimed that AI will bring “the most productive wave of our lifetime” and sees it as a structural factor suppressing inflation, implying room for rate cuts. Treasury Secretary Bostick also compares the current situation to the “productivity boom of the 1990s.” But Goolsbee believes this analogy doesn’t hold.

His core argument is: the macro effect of productivity improvements depends on whether they are “unexpected” or “anticipated.” When productivity exceeds expectations, inflation falls, and interest rates can decline accordingly. But when the market has fully priced in the technological dividends, households and businesses will preemptively increase spending and investment before the productivity gains materialize. This “overdrafting the future” behavior causes current economic overheating, which in turn pushes up interest rates.

He cites the tech boom of the 1990s as an example, when the Greenspan-led Fed raised interest rates six times between 1999 and 2000 precisely to counteract the demand pressures from anticipated productivity-driven demand. Goolsbee bluntly states that Waller’s reference to the 1990s as a basis for rate cuts “is somewhat hard for me to understand.”

St. Louis Fed President James Bullard asked: what if the AI productivity expectations fall short? Goolsbee gave a more severe judgment: if the market continues to expect prosperity and keeps overdrawing on consumption and investment, but the technological dividends ultimately fail to materialize, the economy could enter recession amid demand overheating and persistent high inflation. He said: “It’s very easy to get stagflation; this isn’t a bubble, these are the fundamentals.”

Goolsbee listed several leading indicators he is watching: the wealth effect reflected in housing prices, which boosts consumption; the construction boom in data centers raising land and chip costs, with spillovers affecting industries unrelated to AI; and the number of workers exiting the labor market due to expectations of future wealth increases.

However, this logic is not without dissent. Fed Governor Waller countered at the same forum, stating that the wealth effect channels Goolsbee described “have long existed in many models,” but in actual data, “they haven’t persisted.” If models incorporate the reality that households find it difficult to easily mortgage future income or that spending adjustments are gradual, this effect would be significantly weakened.

Atlanta Fed visiting scholar Steven Davis raised concerns from another perspective: the average AI investment expenditure per firm is 14 times the median, indicating that the investment boom is highly concentrated among a few firms rather than widespread. Economist Luigi Zingales from Chicago University pointed out that a Fed survey shows increasing numbers of residents expect to lose their jobs due to AI, which could actually raise savings rates rather than boost consumption and preemptive spending—contrary to Goolsbee’s worries.

Goolsbee himself admits that this dynamic could indeed point to the opposite conclusion. But regardless, for retail investors holding $BTC and $ETH, the fierce debate within the Fed about AI’s real effects means rate cuts are unlikely anytime soon. If stagflation becomes a reality, risk assets face dual pressures: inflation expectations suppress valuations, and economic recession dampens demand. How long can your holdings hold out?

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