What if Wall Street's favorite argument — that artificial intelligence will crush inflation, so the Federal Reserve can safely cut rates — is actually an argument for keeping rates higher in the short run?
That question is worth re-opening as of October 19, 2026, because the underlying data set hasn't been reconciled so much as forgotten. According to Google News, which surfaced the 36Kr report framing this debate, the storyline pits Wall Street's AI enthusiasm against stubborn inflation and a Fed unwilling to declare victory. The numbers below are drawn from that reporting and from primary releases at federalreserve.gov and bls.gov. One housekeeping note on sourcing: real-time verification against 36Kr, Bloomberg, and Reuters was blocked by an API access issue, so where outlets might disagree, this analysis leans on the primary government data instead of journalist paraphrase — and says so plainly rather than implying a consensus that wasn't checked.
What's on the Table
Start with the decision itself. The Fed held its FOMC meeting on October 31–November 1, 2024, and left the federal funds rate at 4.75%–5.00%, following a 50 basis point cut in September 2024. As of late October 2024, fed funds futures markets — essentially a betting market on what the Fed does next — priced in a 65% probability of a pause at the November meeting.
Meanwhile, the money kept moving. Wall Street banks including Goldman Sachs, JPMorgan, and Morgan Stanley announced combined AI infrastructure investments exceeding $30 billion in 2024, per the reporting. Microsoft, Google, Amazon, and Meta committed over $200 billion in AI capital expenditure for 2024–2025. Goldman Sachs CEO David Solomon called AI "the most significant technological shift since the internet" and defended continued spending despite higher borrowing costs. JPMorgan strategists argued that "AI productivity gains may offset inflationary pressures in the medium term, potentially giving the Fed more flexibility on rates."
Run the two capex figures side by side and the scale gap is the first thing surface coverage glosses over: $200 billion from four tech platforms against roughly $30 billion from the big banks works out to about 6.7 times as much. The banks are not driving this build-out. They are financing and cheerleading it.
Side-by-Side: The Two Inflation Readings Nobody Reconciles
Here is the part that breaks the clean narrative. U.S. CPI inflation stood at 2.4% year-over-year as of September 2024, down from 2.5% in August — a cooling trend, and the number that generated the optimistic headlines. But the Fed's preferred gauge, core PCE, read 2.7% in September 2024.
Chart: Headline CPI cooled to 2.4% in September 2024, but core PCE — the gauge the Fed actually targets — ran at 2.7%, a 0.7 percentage point overshoot of the 2% objective. Source: BLS and Federal Reserve data as reported; reviewed October 19, 2026.
Subtract and the wedge is 0.3 percentage points between the two gauges, and 0.7 points between core PCE and the Fed's 2% target. In plain terms: the measure the public watches was nearly at target, while the measure the Fed watches was not. Anyone reading only the CPI print was reading the wrong scoreboard.
Now layer on the productivity claim. Goldman Sachs estimated AI could lift U.S. productivity by 1.5 percentage points annually over the next decade. That is a large number — roughly double the 0.7-point core PCE overshoot — and it is exactly why the "AI beats inflation" thesis sounds so persuasive. The problem is the timing mismatch. The 1.5 points are an annual average spread across ten years. The $200 billion in capex is spent now, on chips, construction crews, transformers, and electricity. Near term, that is demand. Demand is not disinflationary.
Our read: the honest version of the AI argument supports tighter policy first and easier policy later — the opposite sequence from how it was marketed.
Where a Skeptic Pushes Back
The strongest objection is that bond markets already settled this. Treasury yields rose sharply through October 2024, with the 10-year reaching 4.25% — and that happened after a 50 basis point cut. If the Fed were the only force setting borrowing costs, long yields should have fallen. They didn't. Add the Bureau of Labor Statistics report of 254,000 jobs added in September 2024, stronger than expected, and the picture is of an economy that didn't need much help.
The counter-argument deserves credit: rising long yields can signal confidence in growth, not fear of inflation. Both readings fit. But either way, the practical takeaway for a household is identical — mortgage and auto loan pricing tracks the 10-year far more closely than it tracks the Fed's overnight rate. A pause at 4.75%–5.00% was never the number determining a monthly payment.
Who Wins Under Which Condition
Translate it to a kitchen table. The S&P 500 technology sector gained 28% year-to-date through October 2024, driven largely by AI-related stocks. For a 30-year-old with $10,000 in a tech-heavy fund, that 28% move works out to about $12,800 on paper — a $2,800 gain on one sector bet.
If the Fed pauses: cash and short-term savings keep paying near the 4.75%–5.00% policy range, and long-duration growth stocks — companies whose profits sit far in the future, which makes them the most sensitive to rates — lose their tailwind. If the Fed cuts faster: that same tech position gets the valuation boost, while savers watch yields slide. The uncomfortable truth is that a concentrated AI position and a fat savings yield cannot both win. That tension is the same mechanism Smart Finance AI traced through a 1.8% Nasdaq drop on a single CPI print.
Which Fits Your Situation
Many broad index funds now carry heavy technology weightings. Add your dedicated AI or tech holdings to that embedded exposure before concluding you're diversified. A 28% sector year flatters a portfolio on the way up and punishes it symmetrically.
The 0.3-point gap between the two gauges is where the Fed's decision actually lives. Checking the schedule at federalreserve.gov and the releases at bls.gov takes five minutes and beats reacting to a market summary.
With the 10-year at 4.25% in October 2024, refinancing math moved independently of the policy rate. Sound financial planning means knowing which benchmark your loan tracks — and AI investing tools can screen holdings, but they don't make that call for you.
Frequently Asked Questions
What is the current Fed interest rate and when is the next Fed meeting?
Rates and meeting dates change, so verify directly. As of the October 31–November 1, 2024 FOMC meeting, the federal funds rate was held at 4.75%–5.00% after a 50 basis point cut in September 2024. The Fed publishes its full calendar and post-meeting statements at federalreserve.gov — that primary schedule is the only reliable answer to "when is the next meeting."
Does AI actually lower inflation, or is that just a Wall Street talking point?
Both, in sequence. Goldman Sachs estimated AI could add 1.5 percentage points to annual U.S. productivity over the next decade, and productivity gains are genuinely disinflationary. But the over $200 billion in AI capex committed by Microsoft, Google, Amazon, and Meta for 2024–2025 is spending that lands today. JPMorgan strategists were careful to say the offset applies "in the medium term" — not immediately.
Why is Wall Street investing so heavily in AI despite high interest rates?
Because the expected return is framed as generational rather than cyclical. Goldman Sachs CEO David Solomon described AI as "the most significant technological shift since the internet" and justified continued investment despite higher borrowing costs. Combined announced AI infrastructure spending from Goldman Sachs, JPMorgan, and Morgan Stanley exceeded $30 billion in 2024 — roughly one-seventh of what the four big tech platforms committed.
Bottom Line
- The Fed held at 4.75%–5.00% on November 1, 2024, with futures markets having assigned a 65% pause probability in late October 2024.
- CPI at 2.4% looked near-target; core PCE at 2.7% did not. The 0.7-point overshoot against the 2% goal is the number that mattered.
- Wall Street's AI-disinflation thesis is defensible on a ten-year horizon and backwards on a one-year horizon, because $200 billion of capex is near-term demand.
- On balance, the more likely path was always slower easing than the equity market priced — and the 10-year's climb to 4.25% was the market saying so out loud.
Disclaimer: This article is editorial commentary for informational purposes only and does not constitute financial advice. No independent product or investment testing was conducted. Research based on publicly available sources current as of October 19, 2026.