Central bank may raise key interest rate later this year
The Federal Reserve may raise its benchmark interest rate later this year as the artificial intelligence buildout drives up prices for memory chips, computer processors, and electricity, potentially increasing borrowing costs for auto loans, mortgages, and business loans, according to the Associated Press. Fed officials are closely watching June’s inflation report, due Tuesday, for further signs of the AI sector’s impact on consumer prices.
The gusher of investment in data centers — likely topping $700 billion this year — to power AI has made memory chips, computer processors, and other equipment, as well as electricity, more expensive, the AP reported. Economists expect the AI-driven price pressure will continue to push up inflation at least through the end of this year.
Higher rates from the Fed often boost borrowing costs for auto loans, mortgages, and business loans. Inflation last month likely cooled as gasoline prices have fallen after a ceasefire was reached between the U.S. and Iran, though whether that trend continues is now unclear as the U.S. and Iran have resumed fighting, according to the AP.