Washington —
The Federal Reserve has spent years holding off on higher interest rates, wary of doing unnecessary damage to the US economy. Now, as it prepares to raise rates this week, officials are facing a new question: Will they need multiple rate hikes to bring inflation down?
The monthslong conflict in the Middle East has pushed inflation higher this year, and the risk of those price pressures spreading across the economy is one big reason why the Federal Reserve is expected to raise interest rates this week for the first time since July 2023.
But Fed officials are increasingly worried about another inflation threat, one that could prove much harder to tame: the massive build-out of AI infrastructure.
According to the official minutes from the Fed’s policy meeting in July, “several” members of the rate-setting committee said the huge investments in data centers could have “broader effects on prices by pushing up aggregate demand.”
