The U.S. economy is entering a higher-rate, higher-cost period as strong consumer spending, AI infrastructure investment, persistent inflation, supply constraints and federal deficits push borrowing costs higher. The average 30-year mortgage rate reached 6.95% last week, its highest level in more than a year and a half, after spending much of the 2010s in the 3% range or lower during the COVID-19 period. The Federal Reserve's benchmark interest rate (the central bank's main policy rate) rose to 3.9% Wednesday, prompting President Donald Trump to say on Truth Social that it should instead be 1%. Economists say longer-term rates are increasingly shaped by broader economic forces, including demand for capital from technology companies building AI data centers, higher oil and gas prices because of the Iran war, shortages of chips, electronic equipment and workers, and continuing federal budget deficits. The 10-year Treasury yield (the return demanded on a key government bond) topped 5% this year for the first time since 2023, before Wednesday's Fed decision. Bank of America economists forecast annualized growth of 3% in the July-September quarter after retail sales improved last month, although inflation has exceeded average annual wage growth for five consecutive months. RSM chief economist Joe Brusuelas described the expansion as imbalanced and dependent on AI investment and spending by wealthier consumers. Analysts say the post-Great Recession period of low inflation and cheap borrowing has given way to a structurally more expensive financial environment.