Upward Pressure on Inflation

Tuesday, Sept 30th, 2025

World News — Heading to a Government Shutdown?

FT

US vice-president JD Vance warned that the US government was “headed to a shutdown” after a White House meeting failed to produce a compromise between Donald Trump, Republican leaders, and congressional Democrats, with federal funding set to expire at midnight on Wednesday. Republicans are pushing for a short-term continuing resolution to keep the government funded until November 21, but Democrats insist that any deal must include an extension of health insurance subsidies expiring this year. Both sides traded blame, with Vance accusing Democrats of “holding the government hostage” and Democratic leaders Chuck Schumer and Hakeem Jeffries arguing Republicans were threatening Americans’ healthcare. With Republicans holding a 53-47 Senate majority but still needing seven Democratic votes under filibuster rules, the standoff risks triggering the first shutdown since 2018, with potential furloughs for hundreds of thousands of federal workers and White House signals that agencies could consider layoffs.

Tech — Data Centers Are Leading to Soaring Electricity Bills

The rapid expansion of AI-driven data centers is pushing US electricity costs to record levels, with wholesale prices in some regions rising as much as 267% over the past five years and bills for consumers in cities like Baltimore jumping by 50–80%. These vast facilities, concentrated in hubs such as Virginia’s “Data Center Alley,” are consuming enormous power loads that strain regional grids, forcing utilities and households—even far from the centers themselves—to shoulder higher costs. While tech giants like Microsoft, Amazon, and Google are investing billions in new capacity, the surge has sparked political battles as regulators, states, and utilities debate how to allocate costs fairly between ordinary residents and the world’s richest companies, with low-income and vulnerable communities bearing the greatest burdens. Globally, data centers are projected to consume over 4% of electricity by 2035, a share large enough to make them the world’s fourth-biggest user after China, the US, and India.

Tech — The Economics of Self-Driving Cars

San Francisco has rapidly become the epicenter of autonomous taxis, with Waymo now holding over a fifth of the city’s ride-share market and Tesla and Amazon’s Zoox also entering the space, yet the shift has not eliminated human drivers as feared. Instead, overall taxi demand has grown, with industry employment rising 7% and wages 14% in 2024, while traditional cab usage has remained steady. Much of the added demand comes from residents driving less or tourists eager to try robotaxis, though the vehicles remain pricier, slower, and less flexible than human-driven rides. For now, autonomous taxis cater to a premium niche rather than the mass market, expanding mobility options without displacing San Francisco’s human cab drivers.

The Daily Spark

The US dollar has depreciated almost 10% since the beginning of the year, and the Fed’s model for the US economy finds that a 10% depreciation results in a 0.3% boost to inflation. Put differently, there is not only upward pressure on inflation from tariffs and immigration restrictions but also from the ongoing dollar depreciation, see chart below.

Quote of the Day

“Complaining won’t get you anywhere. Life isn’t fair. Bad things happen to good people. Roadblocks and challenges present themselves to good companies. Great companies and strong people know not to complain as it achieves nothing.”

— Jeff Bezos