AI-driven job losses could pave the way for Fed rate cuts next year, says Robin Brooks

• Energy supply chains are resilient, leading to slower and less significant oil price increases than previously feared, with a near-term target of $80-$90 per barrel.
• Core CPI inflation is benign (June core CPI was near zero), suggesting underlying inflation is not a significant problem, and Brooks worries more about deflation.
• The Fed will not hike rates this week or this year; doing so would be a tactical mistake given the benign inflation data.
• AI-driven automation and potential job losses in white-collar service sectors could lead to disinflationary pressures, paving the way for Fed rate cuts next year.

Robin Brooks argues that markets are taking comfort from resilient energy supply chains, leading to contained oil prices. He believes core inflation is benign and the Fed will not hike rates this week or this year. Looking ahead, AI-driven automation and white-collar job losses could create disinflationary pressures, potentially leading to Fed rate cuts next year.