US Inflation and the Affect on Electricity Rates

US Inflation and Fed Interest Rate Hike: How Are Electricity Prices Impacted?

If you follow economic and financial news, you’re likely aware that the past few weeks have been very turbulent in the US:

The latest Consumer Price Index Report was published on June 10: Inflation has hit another 40-year record of 8.6%, considering the 12 months between May 2021 and 2022. The largest price hikes are in the energy sector, where the CPI increased by 34.6% overall, and the electricity price index is up by 12.0%.

The Federal Reserve announced a 75-point increase in the federal funds rate, which represents an increase from 1.00% to 1.75%. This is part of the Fed’s effort to control inflation, and they announced more rate hikes of similar magnitude during the rest of the year. Many types of loans have interest rates that are pegged to the federal funds rate, and this means they can be expected to rise gradually during 2022.

The US Energy Information Administration published the Short-Term Energy Outlook on June 7, which provides price forecasts for the rest of 2022 and early 2023. The report includes the four main energy products used by homeowners: grid electricity, natural gas, diesel, and gasoline.

Mary Pressler

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