The Bank of England is set to raise interest rates to 1.75 percent, the highest level in 27 years, amid warnings that inflation could reach 15% at the start of next year.
As part of its efforts to bring inflation back under control, the Bank of England’s Monetary Policy Committee (MPC) may raise interest rates by half a percentage point, up from 1.25 percent.
Previous forecasts predicted that Consumer Price Index inflation would peak at around 11% this autumn before falling back.
However, the Resolution Foundation think tank has warned that more financial hardship is possible.
While the prices of some global commodities, such as oil, have declined from their peaks, the price of gasoline is destroying household budgets.
According to one report, ‘it is now plausible that inflation will reach 15% in the first quarter of 2023.’
‘The outlook for inflation is highly uncertain, largely driven by unpredictable gas prices,’ said Jack Leslie, senior economist at the Resolution Foundation, ‘but changes in recent months suggest that the Bank of England is likely to forecast a higher and later peak for inflation – potentially up to 15% in early 2023.
‘While market prices for some core goods – including oil, corn and wheat – have fallen since their peak earlier this year, these prices haven’t yet fed through into consumer costs and remain considerably higher than they were in January.’
Due to Russia’s ongoing invasion of Ukraine, gas prices are expected to be around 50% higher this winter compared to last.
According to energy consultant Cornwall Insight, the annual energy bill this winter is already expected to be £3,615.
The analysis also discovered that the energy price cap will remain above £3,300 from October to at least the beginning of 2024.