Minneapolis Fed says tariffs and AI lift US core inflation
A Minneapolis Fed analysis says core inflation in the US is still stubbornly high, thanks to two big factors: tariffs and a surge in demand for tech fueled by artificial intelligence.
AI investments have pushed up prices for memory chips and computer hardware: video and information processing gear alone jumped 12.2% over the past year.
Core PCE at 3.3% in July
This tech boom has added about 0.4% points to core PCE inflation, nearly matching the impact of Trump-era tariffs.
Inflation for clothing and footwear is also climbing, rising from 0.3% last December to 3.5% by July.
Overall, core PCE inflation hit 3.3% in July (well above the Fed's 2% target).
Even without tariffs, AI-related goods are keeping prices elevated.
The report warns that new auto parts tariffs could push costs even higher soon.