AI Buildout Adds to Fed's Inflation Concerns
Federal Reserve policymakers gained some "wait-and-see" time after the first two batches of June price data came in cooler than expected. With Personal Consumption Expenditures (PCE) data due Thursday, one thing they'll be watching (in addition to oil prices) is how much the AI investment boom may be driving consumer prices higher.
AI-driven inflationary pressures were a concern for policymakers well before June Consumer Price Index (CPI) data showed prices for computer software and accessories rose by a record 17% from a year earlier. Some experts, including Fed Chair Kevin Warsh, see AI as a long-term disinflationary force, limiting price gains. The AI buildout is another matter. It's driving up demand for everything from computer memory to software to electricity, and that's driving up prices, including in some areas where prices have trended lower for decades.
Now it's hitting consumers. Apple (AAPL) raised prices of its MacBooks and iPads by 17% to 25% in June, citing an "extraordinary surge in demand for memory and storage." Microsoft (MSFT) said it would hike prices of its Xbox consoles beginning August 1.
After mostly falling for decades, prices for computer software and accessories have been soaring this year, jumping a record 17% from a year earlier in June. That's the highest year-over-year increase on record. During the first six months of 2026, they rose a cumulative 21%.
Source: Bureau of Labor Statistics
Price pressures are also building upstream. The prices manufacturers received for computer storage devices rose a record 32% in June from a year earlier. They jumped 8.7% from a month earlier, second only to the 8.8% jump seen in January 2026, and they rose a cumulative 23% during the first six months of the year.
Source: Bureau of Labor Statistics
To be sure, computers, electronics, software, and related products account for a relatively small slice of overall consumer spending and inflation. But they matter at a time when inflation remains above the Fed's 2% target. According to minutes from the Fed's June meeting, the AI buildout's impact on consumer prices was one reason the Fed staff raised its inflation forecast for the year. And big jumps in prices of iPads and Xbox consoles could make it harder for the Fed to keep consumer inflation expectations anchored.
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