Rishi Sunak risks missing target to halve inflation, NIESR warns

theguardian.com:

Rishi Sunak is at risk of missing his flagship target to halve inflation this year, one of Britain’s leading economic forecasters has warned, as households are left thousands of pounds worse off amid the cost of living crisis.

Sounding the alarm over the hit to living standards, the National Institute of Economic and Social Research said the soaring price of food and other basic essentials meant inflation was on track to remain persistently high for the rest of this year.

It said the combined impact of the Covid pandemic and the ongoing fallout from the cost of living crisis meant Britain’s poorest households would be about £4,000 a year worse off as a result – significantly higher than for richer households.

Sunak pledged to halve inflation in January, when the rate stood at 10.1%, but the latest figures from March showed it was still at 10.1%. NIESR is forecasting a decline, but it warned on Thursday the rate would remain “persistently elevated”, only falling to 5.4% by the end of 2023.

Inflation, which measures the annual increase in the price of an average shopping basket of goods and services for consumers, has been soaring as households and businesses grapple with energy costs after Russia’s invasion of Ukraine.

The prime minister had made halving the UK’s highest rate of price increases in four decades the top item on his list of five key priorities for 2023, as he set out the opening stall of his premiership with a promise to ease the cost of living.

The NIESR estimate is significantly higher than that made by the Office for Budget Responsibility, the government’s independent economic forecaster, which predicted a drop to 2.9%. Inflation in March stood at 10.1%, fuelled by the sharpest annual increase in food prices