Strategist: Beyond Oil Price Shocks, AI Investment Demand May Become a New Driver of US Inflation

November 10 - Brian Jacobsen, Chief Economist Strategist at Annex Wealth Management, stated that core CPI month-over-month reached 0.3% again. The issue is not only that headline CPI remains elevated, but also that the oil price shock has already transmitted to core inflation. Chicago Fed President Goolsbee does not have voting rights this year, but when he pointed out that AI demand could become a factor the Fed needs to suppress, he may have represented the views of many Fed officials.

Additionally, Fed Governor Waller indicated that he might support a larger rate hike. The Fed may now be more concerned that AI investment demand will crowd out resources from other economic activities and push up prices. Setting aside oil prices, the new Fed concern may be rising hiring costs for skilled trades such as plumbers and electricians.