Chicago Fed's Goolsbee: AI Data Center Boom May Be Fueling Inflation, Requiring Higher Rates

Chicago Fed President Austan Goolsbee said on September 21, 2026, that the AI-driven data center buildout may be generating excess demand and elevated inflation, potentially forcing the Federal Reserve to raise interest rates further. Speaking in London at an Official Monetary and Financial Institutions event, Goolsbee said he is "especially attuned" to elevated service-sector inflation and evidence that AI data center construction is "spilling out of its own lane and raising aggregate output beyond what the economy can absorb." He warned either could signal demand overheating, leaving "no ambiguity about how the Fed needs to respond." The comments follow last week's rate hike and underscore uncertainty over how high the Fed must push rates to balance supply and demand. Goolsbee noted supply shocks from oil, tariffs and commodity prices have proven more persistent than the "one and done" pattern central bankers typically look past. He added that rate hikes need not directly slow AI spending, as tighter policy would curb business investment, housing construction and consumer durables.