At least the UK population is certain about two things come January next year.
Inflation will come very close to or surpass a 50-year high, about as lofty as the giveaway wrapped by the bet365 casino bonus code, only not as impressive.
According to a forecast by Citigroup based on the current market trends, UK inflation continues to surge and may hit 18.6% in January. The report indicates that the rise is a result of the constantly soaring wholesale gas prices.
Citigroup has predicted that UK’s retail energy price cap, the ceiling price households can pay for electricity and heating, may go up by almost £2,650 from the current £1,971 to £4,567 in January. The investment bank predicts that this amount may shoot to £5,816 in March, pushing inflation to the stratosphere.
The chief UK economist at Citi, Benjamin Nabarro, said the UK CPI inflation is expected to peak above 18% in January. If the predictions come to pass, the economy would be worse than in 1979, when the second OPEC oil shock pushed the CPI to 17.8%.
According to the executive, such inflation would press household incomes severely and push the country into a recession. However, he pointed out that the Bank of England will likely make the monetary policy tighter.
Wholesale Natural Gas Prices Already Up 10 Times
The gloomy predictions come when wholesale natural gas prices in the UK and Europe are already ten times above regular costs, with other forecasters painting similar projections. EY and Goldman Sachs predict inflation will surpass 13% around November and December and at least 15% in January.
On Friday, August 26, The Office of Gas and Electricity Markets (Ofgem), the country’s energy regulator, will announce the new energy price cap for October through January. Analysts expect the figure to rise to about £3,500 for households with average energy consumption.
If the analysts’ predictions are anything to go by, the figures will translate to a 75% increase from the current levels. The forecasts have factored in the 25% and 7% increases in wholesale gas and electricity prices, respectively, that came into effect during the week ending on Saturday, August 20.
The figures indicate that despite a softening economy, certain economic factors may get worse. Mr. Nabarro said that the new data set reaffirms the continued risk of headline inflation accelerating domestic price and wage setting.
Energy Costs Threaten Closures
The surging energy costs are affecting the country’s industrial front too. The threat of closures at several factories is becoming real even as demands for products from these companies keep rising. Many businesses are bracing for unprecedented energy costs this winter.
According to a new report, the energy costs associated with running factories may go up 300% by April because of the high energy bills. The situation gets even gloomier if you consider that the country may ration power as the standoff between Russia and Europe worsens the gas crisis in the continent.