When the Fed began hiking in 2022, traditional rate-sensitive sectors like office construction rolled over quickly. But data center construction continued to surge, as investors and hyperscalers judged that AI-driven returns would exceed the higher cost of capital.
In effect, one of the traditional channels through which monetary tightening slows activity, a pullback in commercial construction, has been partially offset by structurally strong demand for digital infrastructure.
High expected returns and strategic capacity needs in data centers help explain why tighter monetary policy has cooled the economy less than in past cycles.
Combined with the positive growth impulse from the One Big Beautiful Bill, we expect economic growth to remain firm through 2026.
Sources: US Census Bureau, Macrobond, Apollo Chief Economist
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