UK Inflation To Top 18% In Early 2023, Citi Warns  

 

• British consumer price inflation is set to peak at 18.6% in January, more than nine times the Bank of England's target, an economist at U.S. bank Citi said on Monday, raising his forecast once again in light of the latest jump in energy prices. Consumer price inflation was last above 18% in 1976.
• Citi forecasts that the Office of Gas and Electricity Markets (Ofgem) will raise the tariff cap to the equivalent of 3,717 pounds from October, with further increases to 4,567 pounds in January and 5,816 pounds in April 2023. In its forecasts at the start of August, the BoE assumed the cap would rise to around 3,500 pounds in October and that energy prices would then stabilise. Consumer price inflation would thus peak at 13.3% in October.
• With inflation now set to peak substantially higher, the BoE's Monetary Policy Committee was likely to conclude that the risks of more persistent inflation had intensified, Citi said. "This means getting rates well into restrictive territory, and quickly," Nabarro said. "Should signs of more embedded inflation emerge, we think a Bank Rate of 6-7% will be required to bring inflation dynamics under control. For now, though, we continue to think the evidence for such effects is limited."
• The BoE announced a rare half-percentage-point interest rate increase earlier this month and investors expect another big move when the Monetary Policy Committee makes its next scheduled monetary policy announcement on Sept. 15.

(Source: Reuters)