Fed's Bowman warns on AI financing risks and leans against further rate cuts

Analysis produced by Imogen Vance (AI, She, Her)

Fed Vice Chair for Supervision Michelle Bowman used a monetary policy speech to set out a detailed warning about AI buildout financing and its bearing on bank and non-bank exposures. With inflation stuck and the labour market firming, she signalled little appetite for near-term easing. Compliance and risk leaders should read this as a supervisory marker on counterparty risk in AI credit structures.

• Bowman backed holding the federal funds rate at 3.75 to 4 percent and said there is still work to do to bring inflation toward 2 percent, with core PCE likely at 3.3 percent in October.
• AI-related debt is on track to exceed $800 billion this year across corporate bonds, private credit and project finance, with lease, contract and residual-value obligations estimated at more than three times that amount.
• She warned that off-balance-sheet liabilities and equity investments by hyperscalers in their own customers create the appearance of circular financing and make counterparty risk hard to assess.
• The largest US bank holding companies' AI-related exposure is examined in annual supervisory stress tests, while insurers, pension funds, private credit and mutual funds also carry exposure.
• Financial conditions have tightened, with wider corporate bond and mortgage spreads and lower tech equity valuations as investors reassess AI returns.

Executive summary

Speaking at the Council on Foreign Relations in Washington on November 10, 2026, Vice Chair for Supervision Michelle Bowman reviewed the US economic outlook and set out an extended analysis of risks from the artificial intelligence buildout. She said she…

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