Federal Reserve officials were divided last month on whether to raise interest rates or keep them steady, with many seeing rising demand for artificial intelligence as a driver of inflation, according to meeting minutes released Wednesday.

The minutes covered the first monetary policy meeting chaired by Fed Chair Kevin Warsh. Many members of the Federal Open Market Committee said that “continued strong demand for artificial intelligence infrastructure is likely to maintain upward pressure on the prices of technology products and electricity.” According to to minutes.

Inflationary pressures related to artificial intelligence, commonly called “chipflation“, is due to the rising costs of semiconductors used in data centers. This boost in demand, along with data center competition for energy, has driven up consumer prices for a wide range of electronic goods, devices and power, and may continue as demand for artificial intelligence increases.

Higher inflation is generally bad news for risky assets like cryptocurrencies because it results in lower liquidity and purchasing power and higher interest rates, making loans more exorbitant and cash investments more attractive.

Inflation will remain elevated in the near future

Participants predicted that inflation “will remain elevated in the near term” but could decline as the conflict in the Middle East subsides. However, they assessed that “risks to the inflation outlook remain tilted to the upside.”

The rise of artificial intelligence has remained a sturdy theme, both driving economic growth and contributing to inflation.

“Most participants noted that growth in economic activity exceeding potential output growth, thanks in part to strong business investment in artificial intelligence, could contribute to persistent inflationary pressures.”

Related: Central bankers are sounding the alarm about the risks of financing artificial intelligence

The Fed’s scatter chart signals increases, not cuts, with nine of the 18 voting members predicting at least one rate hike before the end of 2026 and six expecting two 25-basis-point increases. The central bank’s year-end PCE inflation projection also increased from 2.7% to 3.6%.

The hawkish scatter plot signals that interest rates are likely to stay higher this year for longer. Source: Federal Reserve

At its June meeting, the Fed held interest rates steady at 3.5% to 3.75%, while CME futures markets currently show with a 70% probability that they will remain unchanged at the next meeting on July 29.

Expansion of AI infrastructure causing higher inflation

Nick Ruck, director of LVRG Research, told Cointelegraph that the recent Fed meeting highlighted how the massive expansion of AI infrastructure “is driving higher inflation through surging demand for semiconductors, energy and data centers, even as it promises future productivity gains.”

“While these near-term pressures complicate monetary policy, they also underscore the need for innovative decentralized technology solutions to optimize resource allocation and alleviate bottlenecks in the digital economy,” he said.

Analysts said so this week cryptocurrency markets could benefit from this from any Fed intervention to rein in the booming U.S. stock market during a downturn.

Characteristics: The biggest blockchain improvements will come in 2026