Citigroup has forecast that UK inflation will plunge from double-digit rates to close to 2 per cent by the end of this year as rapid falls in gas price, state recent reports.
According to Financial Times, investment bank Citi said the CPI was likely to fall to 2.3 per cent in November, below the Bank of England’s estimate of a 4 per cent inflation rate the fourth quarter of the year. Fund manager Investec said it could slide to 1.6 per cent by December.
Inflation has remained in double digits since last July – barring a brief drop to 9.9 per cent in August. Most of the increase was due to rising energy and food prices. Interest rate rises by the Bank of England are also expected to have a dampening effect on consumer spending, further reducing the pressure on prices.
“The faster reduction in inflation [this year] primarily reflects an easing in pricing pressures, particularly in energy,” Financial Times quoted Citi’s chief UK economist, Benjamin Nabarro, as saying.
In August last year, Nabarro forecast that rising energy prices would send the CPI to as high as 18.6 per cent in the first quarter of 2023.
Chief UK economist at Investec, Philip Saw, meanwhile has forecasted a fall in inflation to 1.6 per cent by the fourth quarter, driven by falling energy prices and a squeeze from higher lending rates for 1.5 million households that must remortgage this year.
The Consumer Prices Index fell to 10.1 per cent in January compared with a rate of 10.5 per cent in December, the Office for National Statistics (ONS) said. Despite the dip, prices remain high and rising in alcohol, tobacco and household services like energy.
Chancellor Jeremy Hunt welcomed the reduction but cautioned that “the fight is far from over”.
He added in a statement: “High inflation strangles growth and causes pain for families and businesses – that’s why we must stick to the plan (to) halve inflation this year, reduce debt and grow the economy.”