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FollowingFederal Reserve officials were divided last month on whether to raise interest rates or keep interest rates stable. According to minutes of the meeting released on Wednesday, many officials believe that accelerating growth in artificial intelligence demand is one of the drivers of inflation.
Minutes show AI infrastructure demand is driving up price pressures
This minutes cover the first monetary policy meeting chaired by Federal Reserve Chairman Kevin Walsh. Many members of the Federal Open Market Committee said that \"continued strong demand for artificial intelligence infrastructure may put upward pressure on technology products and electricity prices.\" Inflationary pressures related to artificial intelligence, commonly known as \"chip inflation\", stem from the rising cost of semiconductors used in data centers. The surge in demand, coupled with competition for energy in data centers, has pushed up consumer prices for various electronics, equipment and electricity, and this trend is likely to continue as AI demand grows.
High inflation is usually bad for risky assets such as cryptocurrencies because it leads to reduced liquidity and purchasing power and higher interest rates, raising borrowing costs and making cash investments more attractive.
Inflation will remain high in the short term
Participants expected inflation to \"remain high in the short term,\" but inflationary pressures may decline as the conflict in the Middle East eases. However, they believe that \"the risks to the inflation outlook remain upward.\" Artificial intelligence growth remains a strong theme, driving economic growth while also exacerbating inflation. \"Most participants pointed out that economic activity growth exceeds potential output, partly due to strong AI business investment, which may push inflationary pressures more persistent.\"
The Fed\'s \"dot chart\" predicts interest rates rather than interest rates: 9 of the 18 voting members expect to raise interest rates at least once before the end of 2026, and 6 expect to raise interest rates twice by 25 basis points. The central bank\'s forecast for year-end PCE inflation also jumped from 2.7% to 3.6%. The hawkish dot chart suggests that interest rates may remain high for longer this year.
The Federal Reserve left interest rates unchanged at 3.5% to 3.75% at its June meeting, while the CME futures market currently shows a 70% probability of leaving rates unchanged at its next meeting on July 29.
AI infrastructure construction drives up inflation
LVRG research director Nick Rucker told Cointelegraph that the Federal Reserve\'s recent meeting highlighted that large-scale AI infrastructure construction is \"driving up inflation by driving surging demand for semiconductors, energy and data centers, even though it also promises future productivity gains.\" \"While this short-term pressure complicates monetary policy, it also highlights the need for innovative solutions in the area of decentralized technology to optimize resource allocation and alleviate bottlenecks in the digital economy,\" he said.
