Investing.com -- The artificial intelligence infrastructure build-out will create inflationary pressures that could prevent Federal Reserve Chair Kevin Warsh from cutting interest rates as quickly as he has indicated, according to Torsten Slok, chief economist at Apollo Global Management Inc.

"We'll probably have to wait a little while for that because initially the AI boom will certainly be inflationary," Slok said Monday on Bloomberg Television's Surveillance.

Slok pointed to rising semiconductor prices, energy prices, and labor costs as evidence of the inflationary impact. "We should actually expect the AI data-center buildout to be inflationary rather than disinflationary," he said.

Warsh has previously argued that productivity gains from AI should allow for easier monetary policy. His predecessor Jerome Powell faced criticism from President Donald Trump for not cutting rates quickly or deeply enough.

Inflation remained above the Fed's 2% target, with the personal consumption expenditures price index reaching 3.8% in April, the highest level since 2023. Warsh will oversee his first Federal Open Market Committee policy meeting on June 16-17.

Traders currently see about an 80% chance the FOMC will hike rates this year as construction to support AI growth pushes up costs for chips and power. Lagging effects of tariffs and higher energy prices are also contributing, Slok said.

Before the US and Israel launched their attack on the Islamic Republic on Feb. 28, markets were betting on more than two rate reductions by the Fed by year-end.

The largest US tech firms plan to spend as much as $725 billion this year on capital expenditures, primarily on AI data center equipment.