Business · Economy · 11 hrs ago
AI investment and government borrowing may keep interest rates higher
Richard Privorotsky, a partner at Goldman Sachs, says a surge in investment and government borrowing is changing the cost of money.
Companies are planning huge spending on AI and data centres, while governments, especially the United States, are taking on more debt.
That means demand for money is rising as the supply becomes tighter, which could keep interest rates higher for years.
This would mark a break from the era of very low or even negative rates that followed the 2008 financial crisis.
Higher borrowing costs can put pressure on homeowners and housing markets: prices have fallen in Germany’s seven most expensive cities, while US home sales have slowed sharply.
The outlook depends partly on whether AI delivers the earnings investors expect; if the boom falters, planned data-centre projects could be cancelled.
In that case, spending, share prices and interest rates could all fall, Privorotsky says.
A boom in artificial-intelligence investment and rising government borrowing could keep interest rates higher for years, according to Goldman Sachs banker Richard Privorotsky.
About $1 trillion is expected to be spent on AI and data centres in 2026.
The United States is projected to run a budget deficit of about $2 trillion in fiscal 2026.
The article says stronger demand for capital and a tighter supply could end the era of extremely low interest rates.
Higher borrowing costs are already affecting housing markets, with prices falling in Germany’s seven most expensive cities.
- Who
- Richard Privorotsky, a Goldman Sachs partner, warned about the shift in capital costs. Homeowners and borrowers could be affected.
- What
- AI investment and government borrowing may keep interest rates higher for years.
- When
- The article was published on October 31, 2026. It cites spending and deficit forecasts for 2026 and says rates could remain higher for years.
- Where
- The issue is described as global, with examples from the United States, Britain, Germany and Switzerland.
- Why
- AI projects and government borrowing are increasing demand for capital, while the article says its supply is becoming tighter.
This story does not have two clearly opposing sides.
The era of extremely low interest rates began with the global financial crisis, according to the article.
About $1 trillion is expected to be spent in the AI boom, and the United States is projected to record a budget deficit of about $2 trillion.
- AI spending
- About $1 trillion expected in 2026
- US budget deficit
- About $2 trillion projected for fiscal 2026
- Germany housing
- Apartment prices fell by an average of 1% and house prices by 2% in the seven most expensive cities
- Swiss policy rate
- Returned to 0% after the inflation-related rise in rates
What people are saying
We had a glut of savings; now we have a glut of spending
a really profound, fundamental change in how the cost of capital develops
As AI develops, everything else develops