Inflation Fears Rise as Tariffs Hit Polysilicon and Musk's Terafab Project Launches
Federal Reserve official Musalem said that the probability of inflation remaining above target has increased. He was inclined toward rate hikes at the recent FOMC meeting and believes gradual hikes carry lower costs than sudden large adjustments.
The US economy has shown resilience in recent months, and pursuing higher GDP through overly accommodative policy would be a mistake, according to Musalem. He also emphasized that future AI-driven productivity gains remain highly uncertain, with risks skewed toward higher inflation.
In related news, Trump imposed tariffs on polysilicon, setting minimum import prices for the material and its derivatives, and imposing an additional 15% ad valorem tariff. The measures take effect on December 4, 2026, and are accompanied by a 'Reshore America' incentive program.
The Terafab project, launched by SpaceX and Tesla with an initial investment of $16.8 billion, underscores demand for AI compute self-sufficiency and reflects the Musk companies' urgent need for vertical integration in their supply chain.