The AI spending spree is making the Fed's job harder

Most Fed watchers and financial analysts, though, don’t see evidence yet of broad labor productivity gains from AI that could justify a reduction in the Fed’s borrowing rates. Fed policymakers last proceeded with a quarter-point cut at their December meeting and hit pause ever since.

Instead, they’re zeroing in on the rapid data center buildout that’s swallowing up an enormous amount of storage and memory chips — critical components in smartphones, video game consoles, cars, and more — as a culprit for another wave of inflation. The gobbling frenzy weakens the case for lower interest rates further