The data center debate has reached the Federal Reserve. Minutes of the Fed’s September meeting released Wednesday indicate that officials now view the AI infrastructure boom, more than tariffs, as a key force in keeping goods prices high. Policymakers cited a rush of borrowing to finance data centers, chips and related hardware as a “surge in AI-related investments” that could push demand beyond what companies can supply, leading to higher prices, the report said. Washington Post reports.
They noted that prices of basic goods – excluding food and energy – continue to rise at a rapid pace, even as the impact of past tariff hikes fades. The Fed now expects inflation to remain above its 2% target through 2029. Just a year ago, AI was barely mentioned in Fed discussions; this year, it’s a focus, with officials betting it will eventually boost productivity and output, although they admit they don’t yet know how big or fast those gains will be. The minutes showed divergence on the reasons for the interest rate increase, according to Reuters. “Some participants” supported an increase to counter the effect of rising energy prices, while others argued that demand-driven inflation made it necessary to raise interest rates.
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