Tech selloff may ease pressure on the Federal Reserve, says BMO economist

BMO Capital Markets' Jennifer Lee argues that a cooling AI spending boom could give the Fed more room on rates and inflation The AI boom has been great for chipmakers. It has been less great for anyone trying to keep inflation in check. That is the argument from Jennifer Lee, Senior Economist and Managing Director at BMO Capital Markets. Speaking on Bloomberg This Weekend, she said heavy investment in artificial intelligence has helped push both interest rates and inflation pressures higher. Her twist: a cooling in the sector could make the Federal Reserve’s job easier. How AI spending feeds into rates and inflation Heavy AI investment creates demand for energy, labor, and capital all at once. When that much money chases the same scarce resources, prices tend to rise. Building data centers and buying advanced chips requires enormous sums. When companies compete for financing on that scale, borrowing costs across the economy can stay elevated. Lee’s view is that a moderation in that spending could loosen things up. For the Fed, that breathing room could mean more flexibility when setting policy. A bumpy year for AI stocks Her comments arrive after a rough stretch for AI-linked equit...