Connect with us

Hi, what are you looking for?


Prepare for 15% inflation next year, Britain warned

Inflation could reach 15 per cent early next year, a leading think tank warned yesterday, as soaring gas prices exacerbate the UK’s cost of living crisis.

The Resolution Foundation said the Bank of England’s inflation forecasts were likely to be revised upwards in the light of new projections on the price of wholesale gas. Previously, the central bank has said it sees inflation topping 11 per cent in October. City analysts expect it to go even higher, at 12 per cent.

As a consequence, the think tank said, it expected the Bank to announce the largest interest rate rise in 27 years. Economists also expect an increase of between 0.25 and 0.75 per cent.

Andrew Bailey, the Bank of England governor, has made it clear that while a 0.5 percentage point increase in interest rates is “not locked in”, it will be “among the choices on the table” when the monetary policy committee makes its decision today.

Since December, the bank has raised interest rates in 0.25-percentage-point increments, but pledged in June to act “forcefully” if needed in response to inflationary pressures. If the bank’s committee does raise its central benchmark rate to 1.75 per cent, it will be the sharpest increase in borrowing costs for more than a quarter of a century.

Analysts have suggested that the final decision will be finely balanced as inflationary pressures are weighed against the rising risks of recession.

Rishi Sunak intends to use the bank’s announcement to push his argument that inflation must be brought under control before it is safe to cut taxes.

“If we rush through premature tax cuts before we have gripped inflation, all we are doing is giving with one hand and then taking away with the other,” he said. “That would stoke inflation and drive up interest rates, adding to people’s mortgage payments. And it would mean every pound people get back in their pockets is nothing more than a down payment on rising prices.”

In its report, the Resolution Foundation said current expected gas prices for this winter are close to 50 per cent higher than they were in the aftermath of the Russian invasion of Ukraine. The energy price cap is now expected to rise to £3,358 in October and then go up again to £3,615 in January 2023. High gas prices also push up electricity prices, with both leading to increased costs for businesses and consumers that feed inflation.

Jack Leslie, a senior economist at the foundation, said while some other commodity prices had fallen in the past month, the cost of gas was weighing on inflation projections.

“The outlook for inflation is highly uncertain, largely driven by unpredictable gas prices, but changes over recent months suggest that the Bank of England is likely to forecast a higher and later peak for inflation — potentially up to 15 per cent in early 2023,” he said.

“While market prices for some core goods — including oil, corn and wheat — have fallen since their peak earlier this year, these prices haven’t yet fed through into consumer costs and remain considerably higher than they were in January.

“With gas prices continuing to reach record levels, both households and businesses will see large increases in their energy bills throughout the winter and into 2023. How long this high inflation will last is hugely uncertain, but the cost of living crisis looks set to last longer and hit households harder than previously anticipated.”

Read more:
Prepare for 15% inflation next year, Britain warned

You May Also Like


What price happiness? The answer might be £3,360 a year, as the average UK worker would take a 10.5% pay cut to work for...


After taking a breather in the week before this one, the Indian equity markets resumed their up move. The headline index continued with its...


Small businesses are bringing forward their finance applications in order to beat expected further interest rate rises, according to new research. Four-in-ten (44%) SME...


The bears have been in charge of the market for months now, going back to the beginning of January when the S&P topped out...

Dislaimer:, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

Copyright © 2023 | All Rights Reserved