Wall Street Strategists See Tariffs and AI Driving Persistent Inflation, Influencing Fed Policy

Two prominent Wall Street strategists suggest that the ongoing trade war and the boom in AI capital spending are contributing to persistent U.S. inflation, keeping it above the Federal Reserve's target. Headline personal consumption expenditures (PCE) inflation was 3.7% year-over-year in July 2026, with core PCE at 3.3%. Consumer electronics prices are rising at their fastest pace on record due to AI chip demand. The 10-year Treasury yield closed at 4.67%, and consumer sentiment hit a recessionary 49.5, indicating that both bond markets and households anticipate no immediate inflation relief. The Federal Reserve has maintained the upper bound of the federal funds target rate at 3.75% since December 10, 2025.