CPI vs Price-Per-Kilowatt
The case for rate cuts, as broadly anticipated heading into 2025, has materially weakened.
Data center demand continues to exert upward pressure on electricity prices, with the Feb. through May ‘26 3-month rolling average cumulating 346 bps, only modestly below 2025’s 403 bps, indicating that the early-2026 price-per-kilowatt softening maybe transitory at best.
With 40% of power needs coming from data centers by the end of the decade, Fed Chair Kevin Warsh will have to contend with the Fed’s limited tools to push down CPI. To state the problem clearly, here’s Goldman Sachs analysis of the macro effects of rising electricty costs from data centers, “This will lower disposable income, drag down consumer spending and slightly slow economic growth in the coming years.”.
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