The Bank of England predicted at the beginning of the month that increased gas prices would cause inflation to rise above 13% by the end of the year
Citi bank has forecast UK CPI to hit 18.6% in January, and the energy price cap to rise to £3,717 in October, then to £4,567 in January and £5,816 in April, beating the 1979 peak when CPI hit 17.8% following the OPEC oil shock.
Myron Jobson, senior personal finance analyst at interactive investor, said that inflation soaring that high would be ‘unimaginable for personal finances’, particularly after the festive break, when household budgets are leaner post-Christmas.
The harsh reality is many more UK households could face financial breaking point without meaningful intervention, he said.
The Bank of England predicted at the beginning of the month that increased gas prices would cause inflation to rise above 13% by the end of the year.
Meanwhile Goldman Sachs and EY forecast UK consumer price inflation would reach 15%, and Bank of America projected it would peak at 14% in January.
Victoria Scholar, head of investment at ii, said: Recession is almost an inevitability at this stage – with record low consumer confidence, the latest GDP figures pointing to a contraction, and now these fresh eyewatering inflation forecasts.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, explained that rising prices and tightening belts were also making recession more likely, forcing people out of work, and making ‘a desperate situation completely impossible’.
The Bank pushed up interest rates from 1.25% to 1.75% in its last meeting, in a blow to consumers.
Citigroup is forecasting that rates will hit 3% by the end of the year. Coles noted that such a high inflation rate would hit those on lower incomes hardest, as those in the lowest 10% of earners could spend an average 41% of their total income on energy by April.
Given that the price of everything else is also soaring, it is going to be impossible for huge numbers of people to stay on top of their bills. Food prices are also climbing into the stratosphere, with the prices of some staples up well over 25% in a year already, she said.