Federal Reserve officials were split last month on whether to increase interest rates or keep them steady, with many seeing accelerating demand for artificial intelligence as a driver of inflation, according to meeting minutes released on…
Federal Reserve officials were split last month on whether to increase interest rates or keep them steady, with many seeing accelerating demand for artificial intelligence as a driver of inflation, according to meeting minutes released on Wednesday.
The minutes covered the first monetary policy meeting under Fed Chair Kevin Warsh.
Many Federal Open Market Committee members said that “ongoing strong demand for AI infrastructure would likely sustain upward pressure on prices for technology products and electricity,” according to the minutes.
AI-related inflationary pressure, colloquially known as “ chipflation ,” stems from the rising cost of semiconductors used by data centers.
This surge in demand, along with data center competition for energy, has pushed up consumer prices for a wide range of electronic goods, devices and power, and may continue as AI demand increases.
Higher inflation is generally bad news for risk assets such as crypto, as it results in lower liquidity and spending power and higher interest rates, making borrowing more expensive and cash investments more attractive.
Participants anticipated that inflation would “remain elevated in the near term” but may decline as the Middle East conflict eases.
However, they judged that the “risks to the inflation outlook were still tilted to the upside.” AI growth remained a strong theme, both boosting economic growth and contributing to inflation at the same time.
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