UK Inflation set to ‘enter the stratosphere’ and hit 18.6% by January as gas prices continue to surge

 

Inflation set to ‘enter the stratosphere’ and hit 18.6% by January as gas prices continue to surge

Inflation is set to surge to 18.6 per cent in January and average energy bills will hit £5,816 by April, leaving millions of people in “dire straits”, according to alarming new forecasts.

Analysts at investment bank Citi predict that another surge in gas prices last week will push the rate of inflation far higher than even the Bank of England has forecast.

Based on the latest market prices for gas, Citi now expects energy regulator Ofgem’s price cap to hit £4,567 in January and then £5,816 in April, compared with the current level of £1,971 a year.

Wholesale gas prices rose by 25 per cent last week alone and electricity was up 7 per cent.


In Germany, Europe’s economic powerhouse, industry faces a three-day week as supplies are rationed. Flows of gas from Russia which supplied a third of the continents gas little more Ethan a year ago, have dwindled to 10 per cent of their previous level, raising the prospect of blackouts and widespread rationing during the colder months.

On Friday, Ofgem will announce the price cap for October to January, which is expected to be close to £3,600 a year for an average household.

The cap is based on recent wholesale energy costs which, according to Citi, indicate the cap will rise to £3,717 before going “substantially” higher next year.

“Even with the economy softening, last week’s data reaffirmed the continued risk of pass through from headline inflation into wage and domestic price setting could accelerate,” Mr Nabarro said.

Government action to freeze gas prices - as other countries in Europe have done - would bring the peak of inflation down. Without further action the Bank of England will have little choice but to aggressively hike interest rates in an attempt to bring inflation under control.