US-Iran Conflict Escalates, Fed Hints at Rate Hike as AI Industry Booms
Global markets remain on edge as tensions between the US and Iran escalate. US Treasury Secretary Scott Bessent expects interest rates to fall once 'we get on the other side' of the conflict, which he believes will have a disinflationary effect with results showing up in the next six months.
Besides the Middle East situation, investors are keeping an eye on monetary policy. The Federal Reserve governor Michael Barr said he would support a September rate hike if inflation 'appears not to be moderating sufficiently.' Meanwhile, Treasury Secretary Scott Bessent hinted that interest rates may decline after the conflict subsides.
Another area of focus is the rapidly growing AI industry. Artificial intelligence adoption has risen significantly in just two years, with 61% of service firms and 51% of manufacturers now using AI. However, there are concerns about who will power, finance, insure, and monetize the enormous physical infrastructure being built behind AI.
On the economic front, the US manufacturing sector eased to 54.6 in August but remains at a high level. The Atlanta Fed's real GDP tracker ticked up to +4.82% as of September 1st, its highest reading since August 6th.