Cook's remarks lean hawkish at the margin, because she sees inflation pressure broadening while treating the labor market as robust enough to absorb higher rates, which tends to support the US dollar and keep front-end yields firm. Her expectation that oil pass-through is still working its way through the economy keeps energy prices, and the Middle East conflict behind them, a live input for rate expectations. Her view that the Fed's tools are too blunt for narrow sectors suggests policy is unlikely to respond to AI-linked price jumps on their own. Separately, the report on higher bank asset thresholds could be supportive for regional lender equities, though the proposal is still taking shape.---More from the overnight news here:investingLive Americas market news wrap: Oil prices bounce around on Iran headlines, yields riseinvestingLive European session wrap: Higher yields hit gold as oil rallies and tech futures fall---Cook sees AI and oil keeping inflation pressure building, but argues rate hikes are the wrong tool for sector-specific price spikes.Summary:Fed Governor Lisa Cook said in an Oakland speech on Monday that she expects continued inflation pressure from the AI build-out and from higher oil prices and supply chain disruption linked to the Middle East conflict.She said the number and size of any further rate hikes will depend on how the economy responds to policy so far and on inflation and labor data, and that the job market appears well positioned to handle higher rates.Cook said fighting sector-specific AI inflation with monetary policy could be a mistake, but she sees some economy-wide pressure from data center demand for construction labor and energy.She pointed to electricity and water costs up around 5% over the past year, core goods prices running above 3% this year, and AI-linked stock gains feeding household spending.Cook expects productivity gains to trim inflation modestly within a few years, but not in time to offset broadening pressure later this year, and she is watching whether AI lifts unemployment even temporarily.Vice Chair for Supervision Michelle Bowman made no comments on the economy or policy in the material reviewed. Coverage centred on a report that the Fed is considering higher asset thresholds for stricter bank rules.Federal Reserve Governor Lisa Cook said on Monday that she expects the AI build-out, along with the pass-through of higher oil prices and supply chain disruption tied to the conflict in the Middle East, to keep pushing inflation higher in the coming months. In a speech in Oakland, California, she said any further interest rate hikes would depend on incoming data, and that the job market appears well positioned to handle an increase in rates.Cook said the number and size of any future adjustments will be informed by how the economy has responded to policy actions so far, and by inflation and labor data over the coming months. She said she will consider what policy rate may be needed to keep guiding inflation towards the Fed's target.On AI, Cook drew a line between sector-specific and broader price pressure. She said prices for AI-related goods such as chips, computers and software have surged on demand in those areas, and she cautioned that trying to fight that with monetary policy could be a mistake, as the Fed's tools are too blunt to target narrow sectors and addressing relative price shifts is not its role. She nonetheless sees some economy-wide pressure, pointing to data center investment that relies on construction labor and energy and is used across many other sectors, with more investment still in the pipeline. Signs of broadening include electricity and water costs up around 5% over the past year and core goods prices running above 3% this year. Cook also said a large share of the rise in stock prices in recent years reflects AI enthusiasm, and that the added wealth appears to be feeding household spending. That, she said, raises the risk that new and more broadly based price pressures could replace those in the narrow AI sector as they moderate.Cook acknowledged that a well-timed productivity boom could counter broadening price pressure if it lifts supply capacity by more than demand. She said she expects productivity gains to bring a modest decrease in inflation within the next few years, but not in time to offset what she called broadening inflationary pressure later this year. On jobs, she said there is limited evidence so far that AI is changing the labor market's structure, though she expects it to transform business practices and employment in future. She hopes adoption proceeds in a way that lets job creation match or exceed job destruction, and she is watching for even a temporary rise in unemployment, noting that the Fed would have limited tools in that case and that cutting rates to cushion the job market could fan inflation.Michelle Bowman, the Fed's vice chair for supervision, did not address the economic or policy outlook in the coverage reviewed. Attention instead centred on a report that the Fed is considering raising the asset thresholds that trigger stress testing and tougher capital, liquidity and reporting rules, to reflect inflation and economic growth. Bowman has previously argued that fixed thresholds become more restrictive over time, and in January suggested indexing them to nominal GDP. Requirements currently tighten at $100 billion, $250 billion and $700 billion in assets, and moving the upper threshold towards $1 trillion could give larger regional lenders more room to grow. The proposal is still taking shape. This article was written by Eamonn Sheridan at investinglive.com.