The rise in consumer prices in the UK could reach 18 percent in early 2023, nine times more than the Bank of England's 2 percent target.

This was stated in a note to clients by Benjamin Nabarro, the economist from the American bank "Citi" (Citi), quoted by Reuters.

According to the expert, the question now is what policy to implement in order to mitigate the impact on inflation and the real economy at the same time.

In Great Britain, there was inflation over 18 percent back in 1976.

Nabarro expects the front-runner to succeed Prime Minister Boris Johnson, Elizabeth Truss, to announce measures to support households once she comes to power, but he says this will have only a limited effect.

British unemployment has stabilised

The British central bank, which at the beginning of the month predicted a peak of inflation up to 13 percent, will have to come to the conclusion that the risks of longer inflation have increased, the economist emphasizes.

"This means putting interest rates clearly in restrictive territory, and quickly," he points out.

The expert adds that if there are signs of even more entrenched inflation, the Bank of England may have to increase the key interest rate to 6-7 percent to regain control over inflationary dynamics.

However, according to him, the hypothesis of an increase in unemployment in the coming months is more likely, which will allow the central bank to wait.

The Bank of England's Monetary Policy Committee raised the key rate by half a point at the start of the month, and markets expect another hike at the next meeting on September 15.

Great Britain

inflation