Fed's Kashkari says AI investment may be driving up the neutral interest rate

Minneapolis Fed President Neel Kashkari said recent AI investment may be pushing up the neutral rate, the theoretical interest rate that neither stimulates nor slows the economy. If true, it would mean rates need to stay higher for longer without causing a recession. The comment adds an AI dimension to the broader monetary policy debate. AI infrastructure spending has become so large it may be reshaping fundamental economic dynamics.

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