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Inflation to hit ‘astronomical’ 15% next year as UK households face £3,600 utility bills

Bank of England looks set to announce biggest rate hike in nearly 30 years while economists warn inflation could reach ‘astronomical’ 15% People are suffering a double blow to their standard of living.

A new surge in gas prices means average energy bills are expected to exceed £3,600 per year by early 2023, pushing the country into an uncontrollable This is a major headache for central banks trying to keep inflation under control.

A majority of analysts now expect banks’ monetary policy committees to vote on Thursday to raise the bank’s base rate by half a percentage point to 1.75%. This is the largest increase since Ken Clark became prime minister in 1995.

Higher interest rates make it more expensive to borrow a mortgage for millions of homeowners, and the prices of essential commodities like energy and food are also rising much faster than wages.

The Resolution Foundation, a think tank focused on living standards, said it was “plausible” that inflation could rise to 15%, the highest level since 1980.

Low- to middle-income families are likely to face disproportionately high costs of living in the near future, according to the foundation.

We expect inflation to remain persistently high, despite temporary signs that upward pressure on prices may be starting to abate.

Market prices for imported commodities, including oil and wheat, have fallen in recent months as inflation sharply slowed the global economy and cut demand.

However, this has been offset by the continued rise in wholesale gas prices caused by Russia’s war in Ukraine.

Resolution Foundation senior economist Jack Leslie said the outlook for inflation was “highly uncertain” and largely driven by unpredictable gas prices.

“Market prices for some key commodities such as oil, corn and wheat have fallen from peaks earlier this year, but these prices have not yet been reflected in consumer costs, which remain significantly higher than in January.

“As gas prices continue to hit record levels, both homes and businesses will see significantly higher energy prices over the winter and into 2023. While highly uncertain, the cost of living crisis looks set to continue for longer than previously expected, hitting household budgets hard.”

In recent weeks, Russia’s state-owned energy giant Gazprom has cut gas supplies to Europe, driving up prices significantly and pushing rationing in some German regions.

Further turmoil in supply prices will spike further this winter, raising fears that it will plunge the continent into a deep recession as gas inventories run low.

A Nice think tank said it expects inflation to rise to an “astronomical” 11%, with the retail price index (RPI) used to set rail fares and student loan repayments hit 17.7%. warned that it was expected to reach

Nieser warned that the purchasing power of household incomes would fall by 2.5% next year as prices remain “indefinitely high”.

Real household incomes are projected to remain more than 7% below pre-corona trends beyond 2026.

This happened when the Organization for Economic Co-operation and Development (OECD) called on the UK government to restart stagnant growth by boosting public and private investment.

OECD Secretary-General Matthias Koemann said: “Like other economies around the world, the UK economy faces many headwinds, with existing structural challenges being exacerbated by the pandemic and Russia’s war of aggression against Ukraine. increase.

“The key to stronger economic growth and better opportunities is stronger growth in productivity.”

Interest rate hikes by banks will further tighten financial strain, pushing up 20% mortgage rates for tracker and floating trade borrowers. Many first-time buyers and people who re-mortgage in the next year will also pay higher interest rates.

According to Rightmove’s calculations, a 0.5 per cent price increase means a new first-time buyer’s monthly mortgage payment will increase to over £1,000 per month.

This means that mortgage payments account for an average of 40% of gross pay, a level not seen since 2012.

Average mortgage payments have already risen by a fifth to £976 a month this year, compared to £813 a month in January.

Rightmove housing expert Tim Bannister said: Suppose he was able to overcome the hurdles to raise a sufficient amount of deposit.

“A new record first-time buyer asking price of £224,943 means that 10% of first-time buyer type homes have a 57% higher security deposit than 10 years ago, yet the average salary is 1 It’s only increased by 31 per cent.”

Inflation to hit ‘astronomical’ 15% next year as UK households face £3,600 utility bills

Source link Inflation to hit ‘astronomical’ 15% next year as UK households face £3,600 utility bills

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