Food prices, furniture, clothes and housing costs rise as cost of living crisis deepens
James Smith, developed markets economist at ING, is predicting that inflation will peak at 6.5% in April when household energy bills are set to rise by 50%, and end the year at 4% before falling next year.
Inflation has surprised higher (again) and that’s only likely to increase the temptation for Bank of England policymakers to hike rates for a second consecutive meeting this February. But with inflation rates set to plunge in 2023, and the prospects of a severe wage-price spiral looking less likely, subsequent moves are likely to be more gradual.
We’re now getting closer to the inflation peak, which we expect to be roughly 6.5% in April. That’s when the next increase in the household energy cap is due, and the latest futures prices suggest we’re looking at a 50% increase, followed perhaps by another (much smaller) increase in October. That means the electricity costs alone will be adding over 2 percentage points to the headline inflation rate for most of 2022.
