Woofun AI reports that Federal Reserve officials remained divided on interest rate trajectories during their latest policy session, with many attributing persistent inflationary pressures to the accelerating demand for artificial intelligence. The meeting minutes, covering the first monetary policy gathering under Fed Chair Kevin Warsh, highlight a consensus that ongoing strong demand for AI infrastructure will likely sustain upward pressure on prices for technology products and electricity.

Structurally, this phenomenon, colloquially termed "chipflation," originates from the escalating costs of semiconductors required by data centers. The intense competition for energy resources among these facilities has driven up consumer prices for electronic goods and power, a trend expected to persist as AI demand grows. Higher inflation generally undermines risk assets such as crypto by reducing liquidity and spending power, while simultaneously making borrowing more expensive and cash investments more attractive.

Notably, participants anticipated that inflation would "remain elevated in the near term," though they suggested it might decline if the Middle East conflict eases. Despite this potential relief, the committee judged that "risks to the inflation outlook were still tilted to the upside." AI growth remains a dual-edged sword, boosting economic growth while simultaneously contributing to inflationary pressures.

Per Woofun AI, the Fed’s "dot plot" indicates a bias toward hikes rather than cuts, with nine of 18 voting members projecting at least one rate hike before the end of 2026 and six expecting two 25-basis-point increases. The central bank’s PCE inflation projection for year-end jumped from 2.7% to 3.6%, while rates were kept steady at 3.5% to 3.75% in June. CME futures markets currently show a 70% probability that rates will remain unchanged at the next meeting on July 29.

Nick Ruck, director of LVRG Research, told Cointelegraph that the massive AI infrastructure buildout is "driving higher inflation through surging demand for semiconductors, energy and data centers, even as it promises future productivity gains." He emphasized that this short-term pressure underscores the need for innovative solutions in decentralized technologies to optimize resource allocation and ease bottlenecks in the digital economy. While analysts suggest crypto markets could benefit from Fed intervention to backstop the US equity market in a downturn, the prevailing liquidity constraints pose a significant headwind.