UK inflation to remain more than double BoE’s target for entire year
UK inflation will run at more than double the Bank of England’s two per cent target for a whole year, reveals fresh forecasts published today.
The rate of price increases will peak at 6.7 per cent this April, lifted higher by the energy bill cap being hoisted around 50 per cent, according to investment bank BNP Paribas.
October’s 2021 official inflation rate hit 4.2 per cent. BNP Paribas predict the rate will not fall below four per cent until November this year, meaning the cost of living will remain at least double the Bank’s target for an entire year.
Inflation does not fall back to the Bank’s target until April next year under the investment bank’s forecasts.
Soaring wholesale gas prices triggered by an energy crunch in Europe, compounded by supply chain breakdowns and a tight labour squeeze has propelled inflation in the UK to historically high levels.
The cost of living is already running at its hottest rate in over a decade, hitting 5.1 per cent in November, according to the Office for National Statistics.
Households are set to be squeezed by inflation eroding real incomes and the Bank hiking rates rapidly in response to the rapid cost of living increase.
Consultancy Capital Economics is pricing in four rate hikes in 2022, taking borrowing costs 1.25 per cent, the highest level since February 2009.
The predictions come as the International Monetary Fund warned yesterday emerging market economies need to prepare for potential currency fluctuations and financial market volatility triggered by the world’s top central banks tightening policy sharply this year.
The Bank will announce its next decision on interest rates on February 3. Last month, the central bank raised rates for the first time in over three years, lifting them 15 basis points from a record low 0.1 per cent.