Fed Fighting FOMO | May 27, 2026 | Torsten Slok's The Daily Spark | Apollo Global

Sources: Bloomberg, Macrobond, Apollo Chief Economist

Apollo: Normally, when interest rates rise, spending that requires financing slows. This is what we are seeing for housing and autos. Both those sectors are very sensitive to higher rates.

But the data center buildout is different. It doesn’t matter what the Fed does. There is FOMO among hyperscalers, and AI spending is not sensitive to higher interest rates.

In fact, despite the move higher in rates in recent months, the consensus forecast for capex in 2027 continues to rise, see chart.

In other words, there are no signs that the market is expecting a slowdown in AI capex next year.

Combined with strong growth from another interest rate-insensitive source, namely the One Big Beautiful Bill, the bottom line is that rates can continue to move higher because rate hikes are not slowing the economy and inflation, as the textbook would have predicted.