UK inflation to Hit 18% Next Year Due to Energy Cost Increases, Warns Citi

UK inflation to Hit 18% Next Year Due to Energy Cost Increases, Warns Citi

Surging energy bills will drive UK inflation over 18% early next year — the highest peak in almost half a century — investment bank Citi has warned, reports the Guardian.

This is twice the rate of inflation in the United States.

Citi has forecast that CPI inflation will hit 18.6% in January 2023, while the Retail Price Index inflation rate will hit 21% due to extremely painful rises in energy bills that will push the cost of living into the “stratosphere.”

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Benjamin Nabarro, the chief UK economist at Citi, told clients:

Our latest estimate, updated for the further 25% and 7% rally in UK gas and electricity prices last week, points to a further upside shift in UK inflation.

Accounting for these developments, as well as updating our own weights for CPI/ RPI and honing our own accounting for curve backwardation, we now expect CPI inflation to peak at over 18% in January. RPI inflation, we think, will peak at over 20%.