Barclays: Inflation has a memory problem (Highlights)

AI is adding to core (PCE) inflation before it subtracts, with memory and hardware prices skewed higher in the near term.

Price gains may moderate as supply improves, but the Fed will likely find it hard to dismiss AI-related inflation entirely.

Memory inflation still has legs, but the pace may moderate as the cycle matures.

AI-related categories have been a meaningful source of upward pressure on PCE inflation recently, led by electricity and computer software & accessories the category that shows the clearest imprint of the explosion in memory chip prices.

We estimate these categories have cumulatively added about 25bp to annual headline and 20bp to annual core PCE price inflation in recent months.

Barclays FICC Research | Credit & Macro Research