Inflation will soar even further above a near three decade high this week as the squeeze on households tightens its grip, City experts are betting.
Fresh figures released by the Office for National Statistics (ONS) on Wednesday will reveal the the cost of living is running at 5.5 per cent, according to the consensus forecast among economists.
The rapid rate of price rises is igniting concern among economists that the UK’s recovery will lose steam this year due to inflation eroding Brits’ spending power at the fastest rate in recent history.
The Bank of England recently revised down their forecasts for GDP growth in 2022 to 3.75 per cent from five per cent, driven by an expected 7.25 per cent inflation peak in April hitting consumers’ real income to the tune of two per cent, the steepest rate of decline since comparable records began in 1990.
“The surge in inflation will place the biggest squeeze on household finances in more than a decade,” Andrew Godwin, chief UK economist at Oxford Economics, said.
Some analysts characterised the historic high inflation readings as posing a more of threat to the economy than the Covid-19 crisis.
“These sorts of rates of inflation pose an increasing threat to the recovery, arguably more so than the pandemic (at least in its current, milder incarnation),” Ian Stewart, chief economist at Deloitte, said.
Surging energy costs driven by a global oil and gas crunch is expected to drive the bulk of Wednesday’s hot print.
An expected “leap” in core goods prices, including things such as food and car prices, led Pantheon Macroeconomics to agree with the consensus forecast.
Separate jobs market figures published tomorrow will leave officials at the Bank nervous if they point to intensifying wage pressures.
Governor Andrew Bailey was so agitated by the possible spillover inflation effects of workers receiving an overdue pay bump that he asked them to hold back on demanding higher wages after the Bank’s latest meeting.