LONDON, Aug. 13 (Reuters) - AI is storming through markets, construction and corporate planning. But its imprint on the inflation and jobs data the Federal Reserve watches most closely remains too small and contradictory to move the policy dial — at least for now.
For most financial markets, it's hard to ignore the AI boom. Chip stocks around the world have surged and swung wildly this year. Tech earnings growth has exploded, while so-called AI hyperscalers have embarked on a corporate borrowing spree and marshalled hundreds of billions of dollars in financing for the buildout.
And there's little doubt that policymakers are watching closely for the long-term transformative effects of AI adoption on demand for workers, productivity and ultimately the economy's speed limits. Indeed, one of Fed Chair Kevin Warsh's task forces on reforming Fed thinking long term focuses on productivity and jobs and will put the AI revolution under the policy microscope.
But more than halfway through 2026, inflation and labor market data show only glancing blows — and measurement issues are a headache.
July's consumer price inflation report this week revealed some pressure in computer and equipment prices, and there has been a debate inside the Fed for months about how "software and accessories" components have spurred core goods inflation in the Fed's favored personal consumption expenditures (PCE) basket.
Although the methodology is challenged, the PCE index weighting for software and accessories is 30 times that of the consumer price index (CPI). Earlier this year, the category accounted for more than half of the annualised inflation of core goods, which was running above 5%.
And yet, that software and accessories weighting in the PCE basket is just 1.2%.
But so-called "chipflation" from a shortage of memory chips in the AI data-center scramble could spread to other goods containing chips, as Apple AAPL.O's product price hikes last month highlighted. Then there are bottlenecks in demand for physical computers and related equipment too.
Economists at Morgan Stanley point out that the July CPI report indicated that tariff-related goods price rises are topping out, but this was offset as AI-affected prices began to push goods categories back up. The AI price push seems to be broadening to categories other than software and accessories, they added, with July's CPI showing a pickup in electronics prices and personal computers and peripherals climbing 3.5% on the month, likely due to Apple's hikes.
Still, the weighting of the "information technology, hardware and services" segment of the CPI basket is just under 2% — dwarfed by the mega weightings of housing, shelter and transportation, and even lower than the apparel segment.
Of course, the wider influence of chip and information-technology inflation beyond these categories bears watching. These input costs for businesses, and affected sections of the producer price index — such as airfares — feed directly into the PCE calculation.
And yet, it will be a battle for the Fed to disentangle the data and isolate AI as a single factor.
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