Moody's Chief Economist Says AI Is Fueling Stubborn Inflation
Mark Zandi warns AI is pushing prices higher and rate-cut hopes may be premature as May PCE hits its hottest level since April 2023.
Moody's Analytics chief economist Mark Zandi delivered a stark inflation warning on CNBC, telling investors that artificial intelligence is actively driving prices higher — and that the pressure is not temporary. His comments arrive as May PCE inflation registered 4.07% year over year, the hottest reading since April 2023, with core PCE sitting at 3.41%, both figures that signal the Federal Reserve's fight against inflation remains far from finished.
Zandi's argument centers on AI as a structural accelerant rather than a passing disturbance. Unlike supply-chain disruptions or pandemic-era stimulus, technology-driven demand for energy, infrastructure, and specialized labor creates sustained upward pressure on prices across multiple sectors simultaneously — a dynamic that traditional monetary tools are slower to address.
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The timing of the warning is pointed. Markets have been pricing in the possibility of Federal Reserve rate cuts before the end of the year, but inflation readings at this level make that scenario considerably harder to justify. A PCE print above 4% — well above the Fed's 2% target — leaves policymakers with little room to ease without risking a fresh inflation spiral.
For everyday consumers, the implications are concrete: borrowing costs on mortgages, auto loans, and credit cards are likely to stay elevated longer than many had anticipated heading into the second half of 2025. The combination of sticky core inflation and a new AI-linked price driver complicates the economic outlook at a moment when household budgets are already stretched.
Zandi's assessment represents one of the more direct attempts by a mainstream economist to link AI investment cycles to broad consumer price trends — a connection that, if it holds, could reshape how the Fed and markets think about the inflation endgame. Continue reading at Yahoo.
