Global Economics Comment: A Moderate Boost to DM Inflation from AI Demand

Global central bankers are increasingly citing the AI buildout as an inflation driver, focusing on supply bottlenecks, higher import prices and a timing mismatch between near-term demand pressures and lagged productivity gains. This Global Economics Comment refreshes the global model to size AI-related inflation risks. Direct pressures are currently limited in most economies because categories directly exposed to memory prices carry smaller weights outside US core PCE, but should rise in non-US DMs as cost pressures pass through to consumer electronics, which have larger weights there. Indirect pressures via higher activity appear limited: the GDP boost in DMs is moderate, with the largest effects in Australia and the smallest in the UK and Euro Area, implying inflation boosts of less than 0.1pp, largely because production of data center inputs is highly skewed toward Asian exporters. Overall, AI-related price pressures should lift year-over-year core inflation meaningfully through ear