Apollo Chief Economist Says Walsh's Rate Cuts Hindered: AI Infrastructure Boom Will Initially Fuel Inflation

Torsten Slok, Chief Economist at Apollo Global Management, Inc., stated that the initial phase of the AI infrastructure boom will fuel inflation, making it difficult for new Federal Reserve Chairman Kevin Walsh to cut interest rates as quickly as expected. He said: "We may need to wait a bit longer because the initial AI boom will inevitably push up inflation." He pointed out that prices for semiconductors, energy, and labor are all showing clear signs of inflationary pressure.

This assessment cuts to the core contradiction behind the AI boom: while supporters tout its potential for economic growth, the technology's impact has permeated everything from labor markets to monetary policy. Concerns that AI will lead to job losses are overblown, but the scale of capital funneled into AI infrastructure is unprecedented. U.S. tech giants plan to invest up to $725 billion in capital expenditure this year, primarily for procuring AI data center equipment.

Walsh previously argued that productivity gains from AI would pave the way for accommodative monetary policy. His predecessor, Powell, faced sharp criticism from Trump for failing to meet the required pace and intensity of rate cuts. (Jin Shi)