Economy, Europe

UK inflation to rise sharply in next 6 months amid jump in energy, goods prices

Consumer inflation forecast to peak above 5% next April, says Fitch Ratings

Övünç Kutlu   | 23.10.2021
UK inflation to rise sharply in next 6 months amid jump in energy, goods prices



Britain’s consumer price index (CPI) is expected to rise sharply in the next six months as a result of soaring international energy and goods prices, according to Fitch Ratings.

The global rating agency said late Friday that it expects CPI inflation to rise to 4.3% by the end of 2021, up from its previous forecast of 3.4% made just last month.

Consumer inflation is anticipated to peak above 5% next April, it said in a statement, while the energy component of CPI inflation is expected to rise by nearly 1 percentage point in the coming months.

"Retail gas and electricity tariffs are set to rise by 12% in October and we assume they rise by a further 20% in April 2022," it added.

Supply chain issues will also push up core goods inflation, excluding energy, which is expected to rise above 5% year-on-year in the UK, according to Fitch.

"UK manufacturers’ input costs have risen sharply and are being passed through to retail prices," it said, adding: "The shock from energy and core goods is unlikely to be sustained beyond the middle of next year."

Fitch warned that the risk of high headline inflation is pushing up medium-term inflation expectations, which is a bigger concern for the Bank of England, since it could fuel a rise in wages and inflation in the services sector.

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