Energy prices soar as Citi Bank predicts UK inflation will top 18% in January


Citi Bank predicts UK inflation will top 18% in January as energy prices soar.

ENGLAND — According to Citi Experts, as The Country’s Energy Price Ceiling Soars, UK Inflation is on Track to Surpass 18% in January 2023

The Rate of Price Growth or Inflation Reached 10.1% in July Which is Five Times The Bank of England’s (BoE) Target


The American banking behemoth revised its predictions for the consumer price index and retail price index to 18% and 21%, respectively, in the first quarter of 2023 in a research note published on Sunday. This is predicated on the notion that home energy costs will receive a £300 policy offset from October through 2024.

The next price cap hike will be announced by the energy regulator Ofgem this week, and Citi anticipates it will increase from the current £1,971 for an average home to £3,717 annually starting on 1st October. The price cap, which essentially caps the amount a supplier can charge for their tariffs, has lately risen due to an increase in wholesale prices, which has caused British consumers’ bills to soar.

While consulting company Auxilione estimated last week that the cap will exceed £6,000 by the spring, market research firm Cornwall Insight recently forecasted that it would jump to £4,266 in January.

The guidance on future energy prices rising, according to Benjamin Nabarro, senior associate in Citi’s global strategy and macro department, will be the highlight of this week’s announcement.

“We expect further increases to £4,567 in January and then £5,816 in April. The risks here remain skewed to the upside,” Nabarro said.

The main concern right now is how, after a new prime minister assumes office on 5th September, government policies might affect both inflation and the real economy. He asserted that the remarks made so far by Conservative leadership front-runner Liz Truss indicate only a “limited offset” for headline inflation.

“We already account for a £300 reduction in bills associated with the suspension of the Green Levy and a cut to VAT on household energy bills,” Nabarro said.

“However, in reality, any government response to this is likely to involve substantially more fiscal firepower (around £40bn in our view). Offsetting the energy increase in full would cost around £30bn for the coming six months (1.4% GDP).”

The problem for inflation, he continued, is that any budgetary room used is likely to be constrained by the new administration’s determination to slash taxes and the lower medium-term estimates, making disinflationary measures “likely somewhat further down the pecking order.”

The Bank of England raised interest rates earlier this month by 50 basis points, the most since 1995, and forecast the UK will experience its longest recession since the global financial crisis. Inflation was also predicted to reach its high in October at 13.3%.

At the next three sessions of the Bank’s Monetary Policy Committee, Citi now anticipates an additional 125 basis points of monetary tightening. The MPC’s most recent estimates for UK inflation were exceeded in July when it reached 10.1% yearly.

“Even with the economy softening, last week’s data re-affirmed the continued risk of pass-through from headline inflation into wage and domestic price setting could accelerate,” Nabarro said.

“With inflation now set to peak substantially higher than the 13% forecast in August, we expect the MPC will conclude the risks surrounding more persistent inflation have intensified.”

As a result, rates would be soon pushed into restrictive territory. According to Citi, if further embedded inflation is detected, a benchmark lending rate of 6% to 7% will be required to bring inflation under control. 1.75% is the current bank rate.

“For now though, we continue to think the 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,” Nabarro added.

Greg Jackson, CEO of Octopus Energy, stated on BBC Radio 4’s Today programme that a pint of beer would cost £25 if gas costs had increased at the same rate as beer.

“People don’t know what a therm is, but, underneath it, the price per therm has gone from 60p to around £5 at the moment and that’s what’s passing through to customers if we don’t do something,” he said.

Bread, milk, pasta, and butter are just a few of the food items whose costs have increased by more than 18.6% in the last year, according to Sarah Coles, a senior personal finance analyst at Hargreaves Lansdown.

“Inflation at 18.6% would push millions of people into dire straits,” she said.


“And because these horrible price hikes are being driven by the essentials people need to stay alive – like food and heat – it’s going to hit those on lower incomes hardest, who’ve got nothing left to give.”

Since December, the Bank of England has been rising interest rates. Earlier this month, it carried out its biggest hike (0.5%) in 27 years, bringing borrowing rates to 1.75%.

However, Citi stated that it anticipates the BoE raising interest rates even further, up to 7%, in order to reduce inflation.

After the Russian energy company, Gazprom announced it will shut down the Nord Stream 1 pipeline, which is the primary gas export route to Germany, for three days of unscheduled maintenance, European gas prices spiked on Monday due to supply concerns.

The price of British gas for same-day delivery increased 37% to 503p per therm.

If Russia continued to impose supply restrictions on Europe, oil and gas analysts at Investec predicted that UK gas prices would remain elevated.

“This is remarkable in summer when gas demand for heating is at its lowest,” its analysts said.

The government has previously said there would be no new policies before a new prime minister is in place.

After being elected on September 5th, the new leader of the Conservative Party will be under immediate pressure to tackle the country’s energy prices.


Online sources:,

All opinions and views expressed or suggested by the Digital Zeitgeist

are not necessarily the same opinions and views held by or suggested by

GPM-Invest plus any and all partners, affiliates, parties, or third parties of GPM-Invest.

Any type of media distributed by GPM-Invest IS NOT financial advice.

Please seek advice from a professional financial advisor