A pleasant surprise came with the August 2022 inflation figures. CPI was down the 9.9% with the annual RPI inflation rate staying level at 12.3%. CPIH is also slightly down at 8.6%. Most forecasters were expecting further increases.
Last month, I posted the July figures – CPI has reached 10.1%, with RPI at 12.3% and CPIH at 8.8%.
This news follows (but is not affected by) the announcement of new Prime Minister Liz Truss’s plans to freeze the average household’s gas and electricity bill at £2,500 for the next two years last week.
Without this, the Bank of England forecast that without such a cap, inflation would peak above 13 percent followed by a recession while other forecasts predicted that Ofgem’s planned energy price cap rise (£3,549 from 1 October and then an expected jump past £5,000 in 2023) could lift inflation above the 20% mark.
This doesn’t mean that households can stop worrying about their energy bills. They will still rise, though the new price cap combined with a £400 government rebate will take the worst of the sting away. This is still a significant crisis. The Bank of England has a 2 percent inflation target.
Since the announcement of the Energy Price Cap, forecasts are now a good deal more rosy. The FT published [£] a graph based on Goldman Sachs forecasts from last month that outlined what they thought would happen both with and without the cap. This shows inflation peaking well over 10% by Christmas and falling away over the course of the year.
However, most optimism over the past year has been misplaced. I’ve asked colleagues about how we can predict 2023’s figures and the best answer I got was a very long one with lots of links offering conflicting advice…. so let’s just keep watching, shall we?