FED'S WILLIAMS: AI BOOM IS FUELING INFLATION, BUT ECONOMY IS NOT OVERHEATING

New York Fed President John Williams says AI infrastructure demand is pushing up chip prices, construction costs and inflation, with supply unlikely to catch up for several years.

Key takeaways:

* Rates: One more hike in 2026 may be appropriate; no additional hikes currently expected in 2027.
* Inflation: Expected to approach 2% in 2027.
* AI: Strong demand could keep chip prices elevated.
* Economy: Labor markets remain stable, with no broad overheating.
* Treasuries: Higher long-term yields are tightening borrowing conditions.

Williams expects AI productivity gains to eventually help reduce inflation.