Hammack Calls AI Demand "Insatiable," Warns Fed May Need to Yell at Inflation Louder 📢

Cleveland Federal Reserve President Beth Hammack said that "insatiable" demand for artificial intelligence infrastructure could add to inflationary pressure, warning that interest rates may need to rise if broader price pressures do not ease. Hammack, a voting member of the Federal Open Market Committee this year, framed her rate stance around persistent inflation, noting that price increases have been "too high" for the past five years. "When I look at policy, if that continues, it may mean that we need higher interest rates to bring inflation back down to target," Hammack told CNBC.

Hammack acknowledged that higher energy prices have contributed to headline inflation but stressed that core inflation, which excludes volatile food and energy categories, has also stayed elevated. Core personal consumption expenditures, the Federal Reserve's preferred inflation gauge, rose 3.4% year-over-year in May, marking its highest annual reading since October 2023.

On AI spending, Hammack said companies building data centers are willing to pay almost any price for the inputs they need. "What they say is that the demand is insatiable, that these companies, these hyperscalers, will pay almost any price for those inputs, and they need things built yesterday," she commented. She noted, however, that the broader inflation picture spans energy, electricity, insurance, and supply-chain strains tied to the closure of the Strait of Hormuz.

Support for tighter policy extends beyond Hammack. Minneapolis Fed President Neel Kashkari stated that he expects one rate hike in 2026, with cuts off the table for now. Binance Research has previously issued a similar warning, flagging AI-driven chip demand as an underpriced inflation driver for markets watching $BTC and other risk assets.