At a recent press conference, Federal Reserve Chair Jerome Powell said AI-driven data centers are “probably driving inflation,” at least in the short term. He acknowledged AI-driven productivity gains could eventually lower inflation, but for now, the massive physical buildout – construction equipment and materials – are exceeding efficiency gains and contributing to inflation. As RCR TV revealed yesterday in an interview with CBRE executives, “primary market supply increased by 36% year-over-year to 9,432 megawatts (MW), surpassing the 34% increase in 2024, due to accelerated hyperscale demand. And, primary markets posted “record net absorption” of 2,497.6 MW in 2025 – a surge that reflects accelerated leasing activity and occupancy of new supply.” Also contributing to inflation are rapid energy-grid expansions in certain regions, which have caused record-setting residential rate increases, such as a 267% jump in Norther Virgina/Maryland/D.C., and double-digit hikes in Illinois, Ohio, and New Jersey.  All of these factors contribute to the Fed’s “neutral interest rate,” (r)*, which is the theoretical interest rate that neither stimulates nor restricts economic growth. “What’s happening is we’re building data centers everywhere, and that’s actually putting pressure on all kinds of goods and services that go into building these things,” explained Powell, who said the Federal Open Market Committee (FOMC) is currently holding interest rates where they are. “The FOMC decided to leave the policy rate unchanged. We see the current stance of monetary policy as appropriate to promote maximum employment and 2% inflation goals.” He also noted the implications of the Iran War are uncertain, and the Fed will remain “attentive to both sides” of the dual mandate. The Fed’s long-run growth estimates were revised from 1.8% to 2%, perhaps reflecting optimism about AI-driven productivity, but for now, he deemed those gains as theoretical, and not a cause for lower interest rates: “In the near term, you’re not looking at something that would immediately call for lower rates, or that would be lowering inflation,” he said.  A evidenced in our “What you need to know” section, below, the data center boom Powell refers to is going strong, with announcements for an Illinois mega campus the size of NYC’s Central Park, and a new 760 MW facility to be built in Texas.