St. Louis Federal Reserve Bank President Alberto Musalem said the persistent selloff in the U.S. Treasury market reflects competition for capital between large-scale government borrowing and artificial intelligence infrastructure investment, rather than declining confidence in the Federal Reserve’s credibility. In an interview with CNBC, Musalem said, "There is a competition for capital between U.S. government financing and AI buildout. Right now, AI buildout is being financed in the United States and around the world." The 30-year Treasury yield recently reached its highest level since 2007, as spending on data centers and computing clusters competes with government debt issuance for a finite pool of savings. Musalem said inflation expectations remain stable and that the Fed’s credibility is not being questioned, while also maintaining a hawkish position: He would have preferred a rate increase at the Fed’s July meeting and said inflation is more likely than not to remain above the Fed’s 2% target over the next 18 months without further rate increases. Although he does not vote on the Federal Open Market Committee this year, three voting policymakers dissented in favor of a hike at the July meeting, when rates were held steady for a fifth consecutive time. His analysis suggests long-term yields could remain elevated if AI capital spending continues, without necessarily forcing the Fed to cut rates. Investors will be watching inflation data and further comments from Fed officials to see whether the capital-competition framework gains wider acceptance.