Bloomberg’s analysis team is sounding the alarm on British inflation, predicting it could surge up to 15% by the beginning of 2023 as energy prices hit businesses hard.
The outlet reported that unless the government develops measures to relieve the price pressures, they will be stronger and last longer than experts are presently predicting, all as households will be struggling under massive energy bills themselves.
Goods and services costs have already jumped to a 40-year peak in September, as the Consumer Price Index rose 10.1% over the 12 months leading to September 2022 according to projections from the UK Office for National Statistics.
Jeremy Hunt, the UK’s new Finance Minister has a plan to subsidize fuel bills for households, however the proposal will only last until April, and it will not offer relief for soaring electricity costs or prices at the gas pump.
An economist at ING told Bloomberg, “The key question for the 2023 inflation outlook now relates to the energy price guarantee.”
A price cap for energy was announced in September by Prime Minister Liz Truss, during her short tenure, however when the new Finance Minister came in, he quickly reversed it. Absent price limits, experts say energy price fluctuations could hit consumers hard as the cold of winter arrives. Hunt had earlier promised that one priority for the government in dealing with inflation would be “help for the most vulnerable.”
Bloomberg noted that the Bank of England will also be affected by the combination of imminently soaring inflation and the government’s complete lack of any plan to deal with it. In the near term, the regulator could be forced to raise rates aggressively.
The outlet concluded by noting that any precise forecast will be exceptionally difficult given that now that Truss has resigned, there will be a completely new government, which could take policy in any direction, with any effect.
The Daily Financial Trends