Former New York Fed Chair Warns Wall Street May Be Completely Wrong, AI Impacting Interest Rate Volatility

Former New York Federal Reserve Chair Bill Dudley believes that the market may be underestimating the volatility of interest rates. He expects that the boom in artificial intelligence will exert stronger upward pressure on interest rates in the short term, exceeding investors' expectations. If the Federal Reserve tightens its policy further as a result, the subsequent rate-cutting cycle may be more severe than the current market anticipates. The surge in AI investment is altering the path of interest rates under traditional economic cycles: in the short term, capital expenditures on data centers and computing power are competing for funds, driving up growth and asset prices, which may lead to continued increases in interest rates; however, once the peak of investment passes or the financing chain weakens, the economy could quickly decline, forcing the Federal Reserve to implement significant rate cuts.

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