U.S. inflation is being driven by two increasingly visible forces, according to a new analysis from the Minneapolis Fed: the Trump administration's tariff regime and strong demand for artificial intelligence hardware. The research, published August 28, estimated that tariffs added 0.2 to 0.4 percentage points to core inflation as of July 2026, while AI-related demand for memory and computer hardware contributed roughly 0.4 percentage points through higher video and information-processing equipment prices. Core Personal Consumption Expenditures inflation, the Federal Reserve's preferred measure excluding volatile food and energy costs, reached 3.3% year over year through July, its highest level since 2023 and, outside the pandemic period, since the early 1990s. The report said tariffs and AI investment are creating simultaneous price pressures with different transmission timelines, while further tariff pass-through may still be ahead.