Here’s a take you don’t hear often on Wall Street: the AI boom is a problem the Fed needs to solve with higher interest rates. Not eventually. Now.
Freya Beamish, chief economist at GlobalData TS Lombard, is making the case that the massive wave of AI-related spending is generating inflationary demand well before any offsetting productivity gains can materialize. Her argument, laid out in client notes this week, is blunt: tighter monetary policy would be “less ugly” than letting leverage pile up in an overheated market.
The inflation-before-productivity problem
The core of Beamish’s thesis is a timing mismatch. Companies are pouring money into data centers, power infrastructure, and semiconductors at a breathtaking pace. TS Lombard projects that US AI and data-center infrastructure spending will hit roughly 2% of GDP in 2026.
The problem, as Beamish sees it, is that all this capital expenditure is creating demand right now, pushing up prices for energy, construction, chips, and skilled labor. The productivity benefits that AI promises, the kind that would actually help tame inflation by making the economy more efficient, are still somewhere down the road.
