The Fed’s 2% dream gets roasted
Rebecca Walser says the Fed can hike by 25 bps all it wants, but its sacred 2% inflation target may be living on borrowed time. Her argument: AI hyperscalers are in a full-blown capital arms race, and all that spending is keeping inflationary pressure alive.
Why the market should care
If she’s right, this isn’t just a macrohead rant for cable TV. It’s a warning that the Fed may need to rethink what “normal” inflation looks like in an economy where AI infrastructure is swallowing billions like a bottomless pit.
That matters because higher-for-longer rates are not exactly a party for:
- growth stocks,
- long-duration assets,
- and anyone praying for a clean cut in borrowing costs.
The new benchmark problem
Walser’s bigger point is kind of brutal: if AI-driven capex keeps the economy hotter than expected, the Fed’s old playbook may stop fitting. In other words, the central bank might be chasing a target that the new economy just refuses to hit.
Big picture: if AI keeps acting like a giant industrial vacuum, the inflation debate could shift from “when do we get to 2%?” to “is 2% even the right number anymore?”