Inflation Pressures Tell us There is Speed Limit to AI Buildout, Says Coronado

The Federal Reserve is expected to maintain interest rates during the upcoming FOMC meeting, following explicit forward guidance from leadership. Julia Coronado, founder of Macro Policy Perspectives, observes that while Chair Kevin Warsh faces a committee concerned with persistent inflation, the collective dynamic serves as a significant constraint on individual policy shifts. Structural factors like reshoring and immigration restrictions threaten the 2% inflation target, yet the primary economic driver remains the capital-intensive AI buildout. This AI boom fuels global GDP and creates significant wealth effects that sustain US consumption despite stagnant real wage growth and declining consumer purchasing power. While nominal GDP growth may moderate by 2027, the massive capital expenditures required for AI infrastructure continue to underpin the labor market in construction and manufacturing, offsetting slowdowns in other sectors.