October Inflation Data Raise Prospect AI Demand Is Adding to Price Pressures

October inflation data came in above expectations, raising the possibility that demand tied to artificial intelligence (AI) infrastructure is adding to price pressures and complicating the Federal Reserve’s effort to cool the U.S. economy.

Prices for computers and peripherals rose at a 25% annualized pace over the past three months. Electricity prices climbed 0.9% in October, the largest monthly gain in six months, as data center demand pushed electricity demand higher.

Smartphone prices recorded their biggest increase on record in October, coinciding with the launch of Apple’s new iPhone Duo. TD Securities and Morgan Stanley analysts said the electronics price gains were consistent with AI-related demand for chips and other products.

Data center and related infrastructure construction is also supporting broader economic growth. Morningstar Chief U.S. Economist Preston Caldwell said recent data raised the possibility that AI demand is reheating the economy. If that trend continues into 2027, the Fed may need to raise interest rates several times, Caldwell said.

The figures add to earlier concerns that AI infrastructure spending could keep U.S. interest rates higher.