Wu says it has learned that minutes from the Federal Reserve’s July meeting show that participants generally believe inflation remains above the 2% target, and risks are tilted to the upside. Ongoing Middle East conflict, tariffs, and demand pressures stemming from AI investment may make inflation more persistent. The labor market overall remains stable, and economic activity continues to expand steadily, supported mainly by AI-related investment and consumption. Most participants supported maintaining the current target range for the federal funds rate, but several argued for a 25-basis-point rate hike, saying price pressures are still fairly broad. Many participants said that if inflation does not continue to decline further, tighter monetary policy may be needed; some participants believe current financial conditions are still not sufficient to bring inflation back to 2%. The minutes also noted that rapid expansion of AI infrastructure has increased financial stability risks by raising valuations and expanding leverage-based financing. If markets were to cut back expectations for long-term profitability in the AI sector, it could trigger a broad re-pricing of asset prices and tighten financial conditions.