St. Louis Fed President Says AI Infrastructure Behind US Treasury Market Selloff

St. Louis Federal Reserve Bank President Alberto Musalem believes that the current selloff in the U.S. Treasury market is not due to a crisis of confidence in the Federal Reserve's credibility.

In an interview with CNBC, Musalem pointed out that there is a competition for capital between large-scale government borrowing and artificial intelligence infrastructure buildout.

The AI sector is being financed on a massive scale, absorbing global capital and disrupting the supply-demand balance in the bond market. As a result, yields have risen.

Musalem emphasized that inflation expectations remain stable, and the Fed's credibility is not being questioned. He also reiterated his hawkish stance, stating that he would have preferred to vote for a rate hike at the July monetary policy meeting to bring down still-elevated inflation.