RBA says data centre boom drives global inflation

• The Reserve Bank of Australia warned that massive spending on data centres and artificial intelligence is driving up global inflation.
• Central banks may lift interest rates twice this year to curb rising demand and offset weak productivity growth.
• The central bank aims to reduce domestic inflation from 4.35% back into its target range of 2% to 3%.

The Reserve Bank of Australia warned that high demand for data centres is pushing up global inflation alongside the ongoing Middle East conflict.

Central bank officials noted that strong business investment in renewable energy and technology has largely overshadowed the market impact of higher fuel prices.

“The numbers are huge,” Hauser said. “They are huge here. They are huge in the US and in the Asia Pacific as well.

The central bank reported that aggregate demand must slow down to relieve capacity pressure and sustainably lower Australia's 4.35% inflation rate back to its 2% to 3% target range.

Analysts expect global central banks may need to raise interest rates twice this year to keep inflationary pressures from becoming permanently embedded.

Weak productivity growth remains a fundamental challenge that prevents the Australian economy from expanding rapidly without creating additional price pressures.

Former RBA official Luci Ellis noted that while data centre growth is reshaping the economic narrative, policymakers must avoid overstating its direct impact on overall financial conditions.