Bitunix Analyst:Holding Rates Still Cannot Break the"Sticky Inflation"Regime—AI Capex and Geopolitics Are Eroding the Power of High Rates
BlockBeats News, May 29th. US April core PCE rose further to 3.3% year-over-year, the highest reading since November 2023. Fed Bank President Musalem went further, stating that "the probability of a rate hike is greater than zero"—signaling that the Fed is internally beginning to discuss the case for further tightening. Goldman Sachs President John Waldron warned, in a rare public statement, that inflation has become the single largest risk to the current economy. For the first time, markets are pricing higher odds of an additional hike this year than of leaving rates unchanged.
What is truly concerning markets is not just the data itself, but the emerging signs that "high rates are losing their effectiveness." In prior cycles, rate hikes reliably suppressed demand—but today, AI-related capital expenditure is forming a new liquidity black hole. From Microsoft's launch of a new coding model next week to Anthropic's latest funding round pushing its valuation near $1 trillion, AI infrastructure and compute investment continues to expand aggressively. Markets are now realizing that this category of spending is largely insensitive to interest rates: companies remain willing to keep raising capital, expanding capacity, and committing capex—sharply diminishing the demand-suppression channel of monetary policy and structurally embedding inflation stickiness.
A further complication is that US inflation metrics are now displaying a rare and pronounced divergence. Core PCE has risen to 3.3%, but core CPI remains at just 2.8%—meaning that two different statistical methodologies are now describing two entirely different inflation worlds. Because AI equipment, software, and food-services components carry heavier weights in PCE, the inflation pressure the Fed actually focuses on is meaningfully higher than the topline that markets see. The implication: once Kevin Warsh takes over as Fed Chair, markets will not only have to readjust to a new policy direction—they will also have to reexamine "which inflation measure actually defines the risk."
Another thread continues to emerge from the Middle East. While Vice President Vance has stated that a US-Iran agreement is "very close," US and Iranian forces have continued to exchange strikes and sanctions, and Hormuz Strait risk has not truly been resolved. The market's most uncomfortable contradiction now sits with Washington itself: Trump needs lower energy prices to stabilize the election landscape, but Republican hawks refuse to accept any agreement perceived as a concession. This pushes markets into a particularly dangerous state—energy supply risk is not yet resolved, yet inflation and yields are already moving higher in anticipation.
In Asia, Tokyo's CPI has dropped to a four-year low, but markets continue to price a June BOJ hike—driven by lingering pressure from energy, food, and yen depreciation. This signals that major central banks globally now face the same problem: even as growth slows, inflation may remain elevated due to energy, geopolitics, and AI investment—leaving central banks unable to return to accommodative policy.
In crypto, BTC is no longer simply reflecting risk appetite; it is increasingly testing "whether global liquidity can sustain a prolonged high-rate regime." If Treasury yields, the dollar, and energy prices rise in tandem, capital will tend to rotate back into yielding dollar assets and crypto volatility could expand again. Conversely, if US-Iran tensions ease and oil retreats, the market could return to the AI and risk-asset narrative. The deepest shift underway is that capital is now beginning to accept a difficult new reality: high inflation, high rates, and high volatility may coexist for far longer than markets had assumed.
