Fed's Musalem Says AI Spending Boom Is Adding to Inflation Pressure
The Fed vice chair says productivity gains and supply relief from artificial intelligence investment have not yet appeared.
Published
Federal Reserve Vice Chair Musalem says the artificial intelligence capital expenditure boom is creating demand pressure in the economy. He adds that the productivity gains and supply relief that AI investment is supposed to bring have not yet materialized.
The comment follows remarks Musalem made earlier the same day, in which he said the Fed cannot ease policy on hopes that AI will soon lift productivity. Taken together, the two statements rule out, for now, the idea that AI investment could offset the inflation pressure it is creating.
The remarks land in a market already pricing a hawkish Fed. The 10-year Treasury yield rose seven basis points to 5.23% on Monday, its highest level in the current run, and benchmark yields have climbed almost 65 basis points since the end of August. Gold dropped 3.9% to $4,118.66 on Monday as the higher-for-longer narrative took hold.
Musalem's framing lines up with what other Fed officials have been saying. For markets, the statement does not mark a new shift: three additional rate hikes are already priced in, and the bond selloff and higher-yield backdrop stay intact rather than deepen further.