The UK Could Be Facing a 20% Inflation

According to analysts at the American investment company Goldman Sachs (NYSE: GS), inflation in Britain might reach a high number of 20% early next year if skyrocketing gas costs don’t stabilize. They also predicted that a recession would soon follow after the hike in the country’s inflation rate.

Beginning in October, power bills will rise by up to 80% to an average of 3,549 pounds or $4,188 a year, according to the British energy regulator. This energy sector warned last week that millions of people are at risk of falling into fuel poverty if no action is taken to prevent the energy crisis and inflation.

What Do Experts Predict For the UK?

Goldman Sachs mentioned that in the event that gas prices remain too high they would predict the price cap to jump by about 80% in January. That is versus the 19% projected in their baseline. This would suggest that headline inflation would peak at 22,4%, far higher than our base case projection of 14,8%. Citi experts predicted last week that consumer price inflation will reach a peak in January at a high of 18.6%. This rate would be more than nine times the Bank of England’s objective.

According to Goldman, the economy would fall by 0.6% overall in 2023, which is less severe than the 1.5% decline forecast earlier this month by the Bank of England but more pessimistic than the 0.2% increase anticipated by the majority of respondents in a Reuters survey.

According to Goldman, the BoE is poised to increase interest rates by 50 basis points to the rate of 2.25% in the next month. The bank also noted that there were upside risks to their projections for additional 25 basis-point increases in subsequent policy sessions.