AI TRENDS | Morningstar: AI Investment Boom Could Reheat U.S. Economy and Increase Fed Rate-Hike Pressure

According to Jin10, U.S. inflation in October exceeded expectations, indicating that price pressures on consumers remained broad and persistent and prompting concern among some Federal Reserve officials that more aggressive measures may be needed to curb inflation. Over the past three months, prices for computers and peripheral equipment rose at an annualized rate of 25%. Smartphone prices posted their largest increase on record last month, coinciding with the launch of Apple's new iPhone Duo. U.S. electricity prices rose 0.9% in October, their largest increase in six months, as data center demand drove up electricity demand. Analysts at TD Securities and Morgan Stanley said the price increases were consistent with AI-related demand boosting demand for chips and other electronics. A boom in data center and related infrastructure construction is also driving overall economic growth, while Federal Reserve policymakers seek to prevent strong demand from further fueling inflation. Morningstar Chief U.S. Economist Preston Caldwell said in a client report that recent data increased the possibility that the substantial demand-side stimulus from the AI boom was reheating the U.S. economy. If the trend continues through 2027, the Federal Reserve may need to raise rates several times.