54. AI Is Creating a Problem the Fed Can’t Fix (Oct 2026 Interest Rate Update)
Interest rates keep climbing higher. But the real culprit isn’t the Federal Reserve, the White House, the Iran War, or anything else that probably comes to mind.
It’s AI.
The truth is that the recent AI boom has impacted the economy in more ways than one. Because the government is now competing with hyperscaling AI companies for the same pool of bond investors, it’s forced to increase yields. Meanwhile, AI is driving massive stock market gains. The problem is, those gains are highly concentrated, so most people aren’t feeling the positive effects.
AI is responsible for over half of Q1 2026 gross domestic product (GDP) growth. Without it, the Fed might be able to have a conversation about lowering rates. But that’s an entirely different economy and reality than the one we’re living in.
The Fed’s hands are tied.
Today, I break down why this creates a “lopsided” economy, who’s actually benefiting from the AI boom, and why lower rates may require something no one wants: another recession.
Insights from today’s episode:
- Why the Federal Reserve currently has no option but to raise rates
- The real impact of AI “hyperscaling” on the US economy
- Why the US government and “Big Tech” are fighting for the same investors
- Two things that would need to happen before interest rates decline
- What the economy would look like without AI driving more than half of GDP growth
