UK inflation to hit 18% as gas prices rise, banking giant Citi expects – MKFM 106.3FM

UK inflation to hit 18% as gas prices rise, banking giant Citi expects – MKFM 106.3FM

UK inflation is set to top 18% in January – the highest point in more than 40 years and nine times the Bank of England’s target – due to soaring wholesale gas prices, a global investment bank has predicted.

Citi has predicted the retail trade energy price ceiling would rise to £4,567 in January and then £5,816 in April, compared to the current level of £1,971 a year, according to reports.

Rising inflation will intensify the pressure on households that are already struggling with deepening cost of living crisis and increasing pressure on the central bank to take firmer steps in an attempt to curb rising prices.

Consumer price inflation was last above 18% in 1976, official figures show.

The Bank of England’s target is 2 per cent.

Energy watchdog Ofgem will on Friday reveal the energy price cap for the period between October and January, which most analysts expect will rise to more than £3,500 for the average household – an increase of almost 80% on current levels.

Citi economist Benjamin Nabarro said the new inflation forecast took into account a 25% increase in wholesale gas prices last week and a 7% increase in wholesale electricity prices.

But the situation is likely to have already worsened further after another sharp rise in gas prices on Monday ahead of a planned shutdown of the Nord Stream pipeline, which carries supplies from Russia.

There are fears that the taps will not be turned back on because of tensions with the Kremlin after the invasion of Ukraine.

Last week, the Office for National Statistics said inflation had picked up a 40-year high of 10.1% for 12 months to July.

Sir. Nabarro, in a note to clients, said: “The question now is what policy can do to offset the impact on both inflation and the real economy.”

With inflation now set to peak significantly higher than the Bank of England’s 13% forecast, its monetary policy committee is likely to conclude that the risk of more sustained inflation has escalated, the note said.

Sir. Nabarro said: “This means getting well into the restrictive territory and quickly.”

He added: “Should signs of more embedded inflation emerge, we believe a Bank Rate of 6-7% will be required to bring inflationary dynamics under control.

“For now, however, we continue to think evidence of such effects is limited with increases in unemployment still more likely to allow the MPC to pause around the turn of the year.”

Read more:
How everyday goods have increased in price over the past 12 months
Three things need to happen for prices to return to normal

The cost of living crunch has become a main battleground between the two challengers for the conservative party leadershipwith the two camps trade battle over the best way to tackle the crisis.

Meanwhile, the first Australian gas shipment to Europe in more than half a decade arrives in England as gas shortages hit across Europe.

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The Attalos gas tanker is due to dock in Kent with a cargo of liquefied natural gas.

Some of the gas is likely to be used in Britain immediately, but much of it is likely to flow to Europe.

Because of the long distances involved, it is rare for Australian gas to find its way to Europe, with most going to countries in Asia.

But the deep gas crisis that Europe is currently facing has spurred the need for new sources of the fossil fuel.

Sky News

(c) Sky News 2022: UK inflation to top 18% as gas prices rise, banking giant Citi expects

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