A senior City economist has predicted that consumer price inflation will peak at more than 18 per cent early next year, potentially forcing interest rates to rise to as much as 7% to bring surging prices under control.
Following a further increase in the energy price forecast from analysts at Cornwall Insights, Citi economist Benjamin Nabarro is expecting consumer price inflation (CPI) to top out at 18.6%. The last time inflation was above 18% was in 1976.
To counteract this, Mr Nabarro said in a note to clients that interest rates will have to "get well into restrictive territory, and quickly".
"Should signs of more embedded inflation emerge, we think bank rate of 6 to 7% will be required to bring inflation dynamics under control," he said. "For now though, we continue to think evidence for such effects are limited with increases in unemployment still more likely to allow the MPC [Monetary Policy Committee] to pause around the turn of the year."
Interest rate setters at the Bank of England's MPC announced a rare half percentage-point increase to 1.75% earlier this month. Investors expect another big move when the MPC makes its next scheduled announcement on September 15, with markets currently predicting rates to to hit 3.75% by March 2023.
Cornwall Insight has today released a final set of updated forecasts for where it believes the energy price cap set by regulator Ofgem is heading. It now expects the cap to reach £3,553 by October, slightly below what it previously estimated.
However, its January forecast is now £4,650 - nearly £400 more than previously, while its predicted peak of £5,341 in April is nearly £1,000 more than its last estimate.
Cineworld shares in fresh rout as alarm sounds for investors
Shares in Cineworld have been further routed today as the struggling cinema chain responded to media reports about its future.
The chain, which has cinemas in Glasgow’s Renfrew Street and at Silverburn shopping centre on the south side of the city, lost a further 30 per cent of its stock market worth after the company warned investors would lose out in the event it concludes “any deleveraging transaction”.
Historic building for sale in popular Grantown-on-Spey
A historic property in the Highland tourist town of Grantown-on-Spey has been earmarked for development into a hotel.
Grandview House had operated until its recent closure as a care home since 1989.
It is now on the market through Shepherd Chartered Surveyors, which says the building could be converted into flats, hotel, hostel or other tourist accommodation.
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