AI Stock Rout May Ease Fed Inflation Battle, Says BMO Economist

A decline in artificial intelligence (AI) equities could relieve some upward pressure on US interest rates. According to BMO Capital Markets senior economist Jennifer Lee, the downturn might assist the Federal Reserve (Fed) in its efforts to curb inflation.

Lee shared her assessment on Bloomberg This Weekend on November 1. For cryptocurrency investors, this introduces a secondary dimension to a selloff that has already dragged digital asset prices lower.

How the AI Construction Boom Contributed to Higher Borrowing Expenses

The Nasdaq-100 entered its third correction of 2026 last week, while the S&P 500 dropped 1.8% on Friday.

Lee informed Bloomberg that hyperscalers required substantial funding to develop their data centers. Their appetite for corporate debt was among the elements pushing interest rates upward.

She noted that high energy costs and fiscal worries added to the strain. Some US Treasury holders may also be less dependable purchasers than in the past.

The construction wave also pulled land, skilled labor, and resources away from other industries. According to Lee, this crowding-out effect added to inflation and could make it more persistent over time.

She contended that a retreat could slow data center construction. That deceleration would assist the Fed in reducing inflation.

“So if they’re pulling back a little bit, it shows that there could be some cool down in this… All this demand, all this building of the data centers, and that would actually help the Fed’s job and to bring inflation down,” Lee said.

Implications for the Crypto Market

Jennifer Lee’s remarks center on the US economy. However, the same selloff affects cryptocurrencies through two distinct pathways.

The first pathway involves risk appetite. BitMine Chairman Tom Lee linked the recent crypto downturn to the AI selloff in the company’s October 26 announcement.

“Crypto got pulled down by the same ‘risk-off’ forces behind the AI sell-off. In contrast to late-2025 and early 2026, crypto pullbacks have been comparatively shallow. ETH has fallen 13% from its recent peak while US semiconductors ($SOXX) is down 20% in that same timeframe,” Tom Lee noted.

The second pathway is interest rates, and it could exert an opposite effect. If the selloff keeps rates lower, bonds and cash would provide smaller returns. That would make assets such as Bitcoin (BTC) and Ethereum (ETH) comparatively more appealing.

The two effects also arrive at different speeds. The risk-off impact hits immediately, while rate relief depends on yields staying lower for weeks.

That relief has clear boundaries. The Fed boosted rates by 25 basis points on September 16. It then held them at 3.75% to 4% on October 28, with 2 officials voting for another increase.

Jennifer Lee characterized Chair Kevin Warsh’s press conference as fairly hawkish. She added that a December tightening seems like an inevitable outcome.

This week’s payroll report and earnings from Apple, AMD, and Qualcomm will test whether the cooling trend persists.