People walk through the financial district of Canary Wharf as it was announced that British consumer price inflation hit an annual rate of 9.0% in April, in London, Britain, in this May 18, 2022 file photo. [Photo/Agencies]
Dire forecast suggests interest rates would need to hit 7% to cool prices
Residents in the United Kingdom struggling with inflation at a 40-year high could see the economy tank even more next year, with inflation set to rocket past 18 percent in the first quarter, a top bank has warned.
United States financial giant Citi said in its latest crunching of the numbers that UK inflation will be worse than the Bank of England's dire prediction of it hitting 13 percent at the end of 2022.
Citi said inflation, which was thought to be sky high in July at 10.1 percent, will be "entering the stratosphere" next year.
The forecast follows think tank Resolution Foundation saying that it will hit 18.3 percent next year.
Benjamin Nabarro, chief UK economist at Citi, told the BBC that questions about how people will pay for things they need are "growing more deafening by the day".
"The question now is what policy may do to offset the impact on both inflation and the real economy," he said, adding that the UK's central bank, the Bank of England, could help by raising interest rates from 1.75 to 7 percent.
But with the ruling Conservative Party gripped by a leadership election and the government reluctant to make big decisions before it ends on Sept 5, the UK's main opposition Labour Party said London is making things worse than in other countries because of "mismanagement over the past 12 years".
Pat McFadden, Labour's shadow Treasury minister, told The Guardian people fear they will not be able to heat their homes.
"With each passing day there is a new survey saying energy prices will rise even higher than expected and, with them, inflation too," McFadden said. "That is why Labour has proposed freezing energy bills over the coming winter."
The fact that UK inflation is expected to rise to levels unseen since 1976, the so-called winter of discontent in which the country is crippled by a general strike, suggests disquiet among British workers may grow.
Workers demanding pay rises that match inflation have already called strikes that have disrupted rail travel, closed London's underground system, becalmed the UK's largest container port, and interrupted the postal system.
