Fed's Goolsbee warns against front-running productivity growth

• Future income increases and stock market wealth from AI are creating a 'wealth effect' today.
• Massive investment in data centers and consumer spending are premised on high stock market valuations driven by AI.
• This pre-emptive economic activity could overheat the economy, potentially requiring the Fed to raise rates before productivity fully arrives.

Chicago Fed President Austan Goolsbee warns that the current 'wealth effect' from anticipated AI productivity, driving high stock market valuations, data center investments, and consumer spending, risks overheating the economy before actual productivity gains materialize. This scenario could lead the Fed to raise, not lower, interest rates.