# UK inflation to hit 18% in early 2023, Citi forecasts
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-08-22
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: British Consumer Price Inflation set to peak at 18% in 2023
Meta Description: An economist at U.S. bank Citi forecasts consumer price inflation in Britain to reach 18%, raising concerns over policies to counter its impact.
URL: https://financedigest.com/uk-inflation-to-hit-18-in-early-2023-citi-forecastshtml

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By William Schomberg

LONDON (Reuters) – British consumer price inflation is set to peak at 18% – nine times the Bank of England’s target – in early 2023, an economist at U.S. bank Citi said on Monday, [raising his forecast](https://www.financedigest.com/cisco-forecast-raise-allays-tech-spending-fears-lifts-shares.html "Cisco forecast raise allays tech spending fears, lifts shares") once again in the light of the latest jump in energy prices.

The question now is what [policy may do to offset the impact on both inflation](https://www.financedigest.com/boes-mann-falling-headline-inflation-high-core-make-policy-difficult.html "BoE’s Mann: Falling headline inflation, high core, make policy difficult") and the real economy,” Benjamin Nabarro said in a note to clients.

Consumer [price inflation](https://www.financedigest.com/euro-zone-inflation-eases-in-feb-but-core-prices-pick-up.html "Euro zone inflation eases in Feb but core prices pick up") was last above 18% in 1976.

The front-runner to become Britain’s next prime minister, Liz Truss, was likely to come up with [measures to support households that would have a limited offsetting impact on headline inflation](https://www.financedigest.com/factbox-government-measures-to-ease-inflation-pain-2.html "Factbox-Government measures to ease inflation pain"), Nabarro said.

With [inflation now set to peak substantially higher than the Bank of England’s](https://www.financedigest.com/bank-of-england-still-needs-to-see-the-job-through-on-inflation-pill.html "Bank of England still needs to ‘see the job through’ on inflation: Pill") 13% forecast in August, its Monetary Policy Committee was likely to conclude that the risks of more persistent inflation have intensified, the note said.

This [means getting rates](https://www.financedigest.com/samantha-gleave-what-does-the-boes-rate-hint-mean-for-stock-pickers.html "Samantha Gleave: What does the BoE’s rate hint mean for stock pickers?") well into restrictive territory, and quickly,” Nabarro said.

Should signs of more embedded inflation emerge, we think [Bank Rate of 6-7% will be required to bring inflation](https://www.financedigest.com/boes-bailey-says-rate-setters-can-put-inflation-before-bank-worries.html "BoE’s Bailey says rate-setters can put inflation before bank worries") dynamics under control. For now though, we continue to think evidence for such effects are limited with increases in unemployment still more likely to allow the MPC to pause around the [turn of the year,”](https://www.financedigest.com/2043-the-year-britain-will-turn-cashless.html "2043: The year Britain will turn cashless") he added.

The BoE announced a rare half percentage-point interest rate increase earlier this month and [investors expected](https://www.financedigest.com/wave-of-lawsuits-over-ftx-expected-but-investors-will-face-legal-hurdles.html "‘Wave’ of lawsuits over FTX expected, but investors will face legal hurdles") another big move when the MPC makes its next scheduled monetary policy announcement on Sept. 15.

Nabarro said he expected [Britain’s retail price index – which is used to set](https://www.financedigest.com/britain-sets-5g-goal-says-no-magic-number-of-operators.html "Britain sets 5G goal, says no ‘magic number’ of operators") the return on inflation-linked bonds – would peak at over 20%.

(Reporting by William Schomberg; editing by David Milliken)


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