Inflation expected to rise ‘slightly over 4%’ in the final quarter of this year, as energy and goods prices surge
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Pushpin Singh, economist at the Centre for Economics and Business Research, predicts UK interest rates will rise in the second quarter of next year.
Singh also warns that inflation pressures are likely to continue into 2022, with the current spike in gas prices adding to price pressures.
Bank staff projections for growth in the third quarter were revised down to 2.1% quarter-on-quarter, down from the 2.9% quarterly growth at the time of the August MPC Report, with the Bank citing an “emergence of some supply constraints on output ”.
Meanwhile, the Bank of England expect CPI inflation to rise temporarily, to slightly above 4.0% in the fourth quarter. However, we believe that some of the factors driving inflation at the moment may well extend into the first months of 2022. Consequently, Cebr expects the Bank to start raising interest rates in the second quarter of 2022 in order to bring inflation back to the 2% target.
“Uncertainty around the outlook” for the UK labour market has increased, as the end of the furlough scheme approaches, the Bank of England warns.
The minutes of its MPC meeting say:
Key questions included how the economy would adjust to the closure of the furlough scheme at the end of September; the extent, impact and duration of any change in unemployment; as well as the degree and persistence of any difficulties in matching available jobs with workers.
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