Fed's Goolsbee Warns AI Boom Is Fueling Broader Inflation Beyond Data Centers

Chicago Fed President Austan Goolsbee said the inflation tied to the AI boom is "jumping out of its lane," spreading price pressures into parts of the economy well beyond data centers and their directly adjacent industries. Speaking on Semafor's Compound Interest program, Goolsbee said surging demand for land, electricity, water, construction and electrical components is now competing with other industries for scarce resources, adding: "I'm getting increasingly nervous that that's just straight, old-fashioned overheating demand."

Goolsbee warned that overall inflation remains too high and said the Fed needs to start showing progress to return to the rate-cutting path it had been on. He added separate concern that tariffs and oil prices could combine to produce stagflation, presenting the Fed with a particularly difficult policy dilemma. He cautioned that persistent inflation could force the Fed to hold rates tighter for longer or raise them further.

Fed Governor Christopher Waller offered a partially different read on the same AI investment surge. Waller attributed surging U.S. Treasury yields primarily to strong economic growth and AI-driven investment rather than to inflation expectations, which he said remain anchored. He warned, however, that weaker safe-haven demand for U.S. debt may be adding 50-70 basis points to yields, and he projected the AI investment boom will continue for another 2-3 years.