![Federal Reserve Bank of Cleveland President Beth Hammack warned that sustained growth in demand for AI infrastructure could trigger inflation. [Reuters]](https://wimg.heraldcorp.com/news/cms/2026/07/01/news-p.v1.20260701.ce1fdc9f33544dbeb70a9ea8b4c444f4_P1.jpg)
Federal Reserve Bank of Cleveland President Beth Hammack warned that a surge in demand for AI infrastructure could stoke inflation.
Speaking in an interview with CNBC on Monday (local time), Hammack said inflation "is too high right now and has been running high for the past five years," adding that "from a policy perspective, if that continues, we may need to raise interest rates to bring inflation back to the Fed's target."
The Fed targets inflation of around 2%, but actual inflation has been running well above that level, hovering near 4%. High oil prices stemming from the war involving Iran also added upward pressure on prices for a period.
Hammack said rising AI-related spending is adding to those inflationary pressures. She cited a manufacturer of power switchgear for data centers in her district, saying the company told her "demand is endless" and that hyperscalers — large-scale data center operators — "are willing to pay almost any price for inputs and need the products finished immediately." She added that large companies in particular "are not significantly constrained by economic conditions," and that she had never heard of them hesitating on investment and growth because of interest rates or credit spreads. She warned that all-out investment by major corporations in AI infrastructure could fuel inflation.
The view stands in contrast to that of Fed Chair Kevin Warsh, who has said AI-driven productivity gains would lower labor costs and ultimately produce a deflationary effect.
Hammack acknowledged that "AI can cut both ways," but said the investment boom accompanying infrastructure buildout could trigger inflation. Hammack holds a vote on the Federal Open Market Committee this year.
kate01@heraldcorp.com
