Fed Faces Dilemma: Tame Inflation or Cushion AI Bubble Burst

The Federal Reserve is set to make a crucial decision on interest rates, and the calculation is complicated by multiple factors. The Consumer Price Index report for August showed a 0.4% rise in inflation over the month and 3.4% over the past year.

However, this inflation is largely driven by external factors such as the Iran war and Trump's tariffs, which have pushed oil prices above $100 a barrel.

The Fed governors are under pressure to raise interest rates to combat expected inflation, but this would paradoxically push other rates higher in the near term.