U.S. Fed officials warn AI demand could spur rate hikes

Federal Reserve officials said the surge in artificial‑intelligence infrastructure spending is adding to inflationary pressure and could force higher interest rates. San Francisco Fed President Mary Daly described U.S. monetary policy as “slightly restrictive” and noted that “you don’t want to react quickly when the world is changing quickly,” citing the “exceedingly strong” AI‑related investment and a stable labour market as sources of uncertainty about the next policy move. She also highlighted the recent drop in oil prices after the Iran cease‑fire as a positive factor.

Cleveland Fed President Beth Hammack warned that “insatiable demand of AI infrastructure is fueling inflation.” She said the pressure “has been too high for the past five years” and that, if it continues, the Fed may need to raise rates to bring inflation back to target. Both officials emphasized that AI‑driven demand is currently pushing up demand‑side pressure, even as some Fed members argue that productivity gains from AI could eventually be disinflationary.