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UK inflation could reach 15% by start of 2023, experts say

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theguardian.com

The UK’s annual inflation could go as high as 15% by the start of 2023, experts have forecast, as further sharp increases in energy prices push up the cost of living.On the eve of the latest decision on interest rates by the Bank of England, the Resolution Foundation thinktank said price pressures were likely to be stronger and last longer than the Bank had previously forecast.The Bank’s monetary policy committee – which said in June that it expected inflation to peak at just over 11% in October – is poised to raise official borrowing costs for a sixth successive time despite signs that the economy is weakening.The latest monthly health check of the service sector from S&P Global and the Chartered Institute of Procurement and Supply found activity among private firms operating in the service sector has fallen to its lowest level since the winter lockdown of early 2021.Tim Moore, economics director at S&P Global Market Intelligence, said: “Reduced levels of discretionary consumer spending and efforts by businesses to contain expenses due to escalating inflation have combined to squeeze demand across the service economy.“The near-term outlook also looks subdued, as new order growth held close to June’s 16-month low and business optimism was the second weakest since May 2020.”The Resolution Foundation pointed to some good news on inflation, as some commodity prices fell, including oil, but this was being more than offset by the rising cost of gas.

As a result, the UK’s annual energy price cap is now predicted to go up from just under £2,000 to about £3,500 when the new figure for October is announced at the end of the month.Jack Leslie, senior economist at the Resolution Foundation, said: “The outlook for inflation is

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