Woerheide: Significant Financial Shift Could Occur If AI Bubble Bursts or Sees Major Correction

BlockBeats News, July 14th, Federal Reserve Governor Waller stated that if the artificial intelligence (AI) related asset bubble bursts or the market experiences a sharp correction, the financial environment will undergo a "significant change."

Waller expressed that he does not want the Federal Reserve to raise interest rates prematurely to avoid triggering an economic downturn, but also emphasized the need to avoid the pitfalls of the slow response to inflation faced in 2021. He believes that the current job market remains stable and there are "credible reasons" to believe that inflation is expected to continue to decline without the need for further policy tightening.

However, Waller warned that relying solely on the market's expectations for inflation to fall is not sufficient to support the Federal Reserve's continued wait-and-see approach. If the Fed waits until market confidence fades before taking action, it may have to raise interest rates more aggressively to catch up with inflation. "We cannot tolerate turning a blind eye to inflation until it completely disappears," he said.