Home > Cleveland Fed President Hammack says AI could fuel inflation, rate hikes may be necessary
Cleveland Federal Reserve President Beth Hammack said Tuesday that “insatiable” demand for artificial intelligence infrastructure could be a source for inflation.
Should that and other pressures continue to keep prices elevated, that could drive the need for higher benchmark interest rates, the central bank policymaker said in a CNBC interview.
Hammack honed in on AI spending, particularly citing a manufacturer in her district involved in electric switching for data centers.
“What they say is that the demand is insatiable, that these companies — these hyperscalers — will pay almost any price for those inputs, and they need things built yesterday,” she said. “When I look broadly, particularly around large companies, I’m not seeing a lot of restraint in the economy. I’m not hearing from these businesses that interest rates or credit spreads are a reason why they’re holding back from investment and growth.”
Federal Reserve Bank of Cleveland President and CEO Beth Hammack speaking with CNBC from Sintra, Portugal, on June 30, 2026.
CNBC
Hammack did couch her outlook, saying “the could be impacts in both directions.”
The notion that AI could be fueling inflation runs against a key assertion from Fed Chairman Kevin Warsh, who believes that productivity gains from the technology will decrease the cost of labor and ultimately prove to be disinflationary.
At the same time, Warsh, in his first news conference as head of the central bank, expressed firm commitment to bringing down inflation, something Hammack also emphasized.
“If inflation continues to persist at these elevated levels and I don’t see any restraint from policy, we may need to raise rates to bring that policy restraint in and to bring inflation back down,” she said.
Hammack is a voting participant this year on the rate-setting Federal Open Market Committee. The panel earlier this month voted again to keep its key overnight interest rate steady but penciled in a quarter percentage point increase this year, consistent with market expectations.
Cleveland Federal Reserve President Beth Hammack said Tuesday that “insatiable” demand for artificial intelligence infrastructure could be a source for inflation.
Should that and other pressures continue to keep prices elevated, that could drive the need for higher benchmark interest rates, the central bank policymaker said in a CNBC interview.
Hammack honed in on AI spending, particularly citing a manufacturer in her district involved in electric switching for data centers.
“What they say is that the demand is insatiable, that these companies — these hyperscalers — will pay almost any price for those inputs, and they need things built yesterday,” she said. “When I look broadly, particularly around large companies, I’m not seeing a lot of restraint in the economy. I’m not hearing from these businesses that interest rates or credit spreads are a reason why they’re holding back from investment and growth.”
Federal Reserve Bank of Cleveland President and CEO Beth Hammack speaking with CNBC from Sintra, Portugal, on June 30, 2026.
CNBC
Hammack did couch her outlook, saying “the could be impacts in both directions.”
The notion that AI could be fueling inflation runs against a key assertion from Fed Chairman Kevin Warsh, who believes that productivity gains from the technology will decrease the cost of labor and ultimately prove to be disinflationary.
At the same time, Warsh, in his first news conference as head of the central bank, expressed firm commitment to bringing down inflation, something Hammack also emphasized.
“If inflation continues to persist at these elevated levels and I don’t see any restraint from policy, we may need to raise rates to bring that policy restraint in and to bring inflation back down,” she said.
Hammack is a voting participant this year on the rate-setting Federal Open Market Committee. The panel earlier this month voted again to keep its key overnight interest rate steady but penciled in a quarter percentage point increase this year, consistent with market expectations.
Treasury yields move higher on June’s final trading day
U.S. Treasury yields were higher on the final trading day of June as traders digested more jobs data.
The yield on the key 10-year Treasury note — the main benchmark for mortgages, auto loans and credit card debt — rose more than 6 basis points to 4.441%.
The yield on the 2-year Treasury note, which closely tracks short-term Federal Reserve interest rate decisions, advanced more than 4 basis point to 4.152%. The 30-year Treasury yield, which often moves on geopolitical events, was up more than 6 basis points at 4.929%.
One basis point equals 0.01%, or 1/100th of 1%, and yields and prices move inversely to one another.
The latest job openings data for May came in at 7.6 million, according to the Bureau of Labor Statistics, That’s above the 7.3 million that economists polled by Dow Jones expected. U.S. job openings rose to 7.6 million in April. That jump meant there were more available jobs than unemployed workers.
Yields were largely unmoved during Monday’s trading session, as investors assessed how the evolving Middle East peace process is shaping inflation expectations.
Oil prices were slightly lower on Tuesday. U.S. West Texas Intermediate futures settled down 1.77% to $69.50 a barrel. Brent crude, the global oil benchmark, closed down 0.31% at $72.92.
With energy costs retreating towards their pre-Iran war levels, traders will turn to key employment data this week to gauge how the U.S. economic and inflation picture is unfolding.
The latest ISM manufacturing PMI data for May are out Wednesday, before June’s unemployment rate and nonfarm payrolls, which are due Thursday.
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