AI driving wedge between CPI and PCE
July 08, 2026
Artificial intelligence (AI) is increasingly influencing inflation data, not just economic growth and corporate earnings. Demand tied to the AI infrastructure buildout has pushed prices for computer software and accessories sharply higher, creating a meaningful divergence between the Consumer Price Index (CPI) and the Personal Consumption Expenditures (PCE) index. “Core PCE remains the Fed’s (the Federal Reserve) preferred inflation gauge, but it likely is overstating the degree of inflation stickiness while CPI understates it,” says Garrett Melson, CFA®, Portfolio Strategist at Natixis Investment Managers Solutions.
- Prices for computer software and accessories have risen nearly 60% annualized over the past six months.
- Weighting differences between CPI and PCE can cause technology-related price increases to have a much larger impact on the Fed’s preferred inflation measure.
- AI-driven price pressures are unlikely to prompt a policy response from the Fed, leaving the bar high for both interest-rate hikes and cuts.
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