UK inflation could top 22% on the back of high energy costs next year as new data showed that consumers are already paying record prices in the shops.
That is the latest prediction from global investment banking giant Goldman Sachs, which is forecasting the eye-watering figure should the Ofgem price cap rise by 80% in January, the US investment bank said.
The projection is based on record natural gas prices, which have risen by 90% this month alone, though they fell yesterday.
The Times said that Goldman’s projection tops the 18.6% consumer price inflation peak predicted by the US investment bank Citigroup and is far higher than the Bank of England’s expectation of a 13.3% peak this October, in forecasts made at the start of this month.
Sven Jari Stehn, chief European economist at Goldman, warned gas prices posed a significant risk.
He said: “Wholesale gas prices in the UK have surged by 145% since the start of July and while our commodity strategists do not expect the recent spike in European gas prices to persist, we view persistently higher gas prices as an upside risk to our forecast for the Ofgem price cap increase in January."
Inflation of 22% or more would have a severe impact on households during a recession and lead the economy to shrink by 3.4% over the next year, Goldman said in a research note to clients.
Household real disposable income is due to fall 0.4% this year and 2.9%the next, the bank said.
Mr Stehn added: “Despite the incoming recession, we expect the Bank of England to hike by another 50 basis points in September and see upside risks to our expectation of 25 basis points hikes in November and December, given continued upside inflation, wage growth surprises and the need to keep inflation expectations anchored."
Meanwhile, August figures from the British Retail Consortium showed monthly shop-price inflation of 5.1% in August, the highest since the index began in 2005.
The price of fresh food climbed most, up 10.5% compared with the same month last year.
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