Bitunix Analyst: Fed Pauses But Divisions Widen — AI Investment and Energy Inflation Test Policy Room

October 29 — The Federal Reserve voted 10-2 to keep the federal funds rate at 3.75% to 4%, but two officials advocated for a 25 basis point rate hike, indicating that inflation risks have deepened policy divisions. The Fed noted that U.S. economic activity remains strong, domestic spending is resilient, and inflation remains elevated; therefore, holding steady does not mean the tightening cycle is over, and the path ahead still depends on changes in prices and financial conditions.

The core of this policy discussion is whether AI investment can withstand high interest rates. While large tech companies have ample cash, data center operators and infrastructure suppliers still rely on external financing, and rising borrowing costs may gradually compress capital expenditures. If AI investment is sensitive to interest rates, limited tightening could amplify the cooling effect; if investment remains strong, the Fed may be forced to suppress housing, consumption, and corporate demand, paying a higher growth cost. Elevated energy prices add to inflation stickiness, making policy judgments more complex.

The European Central Bank similarly faces a tug-of-war between inflation and growth. Markets expect the deposit rate to be held at 2.5% this time, but attention remains on whether another rate hike will come in December. As energy costs push up price risks, eurozone growth momentum is slowing, and rising French government bond yields and risk premiums could further tighten the economy through financing costs. If bond market pressure persists, central banks may need to weigh the impact of financial fragmentation on growth even while maintaining an anti-inflation stance.

For markets, the key is no longer just whether central banks raise rates this time, but whether high rates can effectively curb demand without unexpectedly crushing investment and credit. If energy inflation persists and AI financing costs rise in tandem, global financial conditions could tighten further; if growth cools before inflation, policymakers will face the risk of over-tightening. Future inflation data, corporate financing conditions, and U.S.-Europe bond market spreads will be important clues for judging the policy path.