Central bankers eye higher rates as AI boom fuels scramble for cash

Central bankers are considering higher interest rates as technology companies pour money into artificial intelligence (AI) projects. At the International Monetary Fund and World Bank meetings in Bangkok, officials from the world's largest economies discussed the boom in AI-related spending and its impact on borrowing costs and inflation.

Federal Reserve Chair Kevin Warsh warned that the investment in AI is creating fresh inflation pressures and financial risks because it arrives in the economy before the promised productivity gains materialize. ECB policymaker Martins Kazaks noted that the global fight for money is driving up the cost of borrowing, while South African Reserve Bank Governor Lesetja Kganyago expressed uncertainty about the appropriate level of interest rates, stating that the neutral rate is likely higher but not yet clearly defined.