Inflation could surpass 4% by early 2022 say think tanks

The National Institute of Economic and Social Research (NIESR), Britain’s oldest independent economic research institute, has said inflation will surpass 4% next year.

The NIESR claimed that short-term pressures, such as soaring energy bills, supply chain issues and worker shortages will increase consumer prices over the coming months.

Their latest figures suggest that inflation “will peak above 4% in the first half of 2022 and that the Bank of England will consider a rate increase to prevent a wage & prices spiral from de-anchoring inflation expectations.”

Responding to ONS consumer price inflation figures for September 2021, Julian Jessop, economics Fellow at UK-based free market think tank the Institute of Economic Affairs, agreed that inflation could soar beyond 4 per cent by the end of the year.

He said: “The small dip in UK consumer price inflation in September, from 3.2 per cent to 3.1 per cent, is good news and probably a relief both to the Bank of England and the Chancellor. But it does not change the big picture: there are huge price pressures in the pipeline, and inflation is still likely to be well above 4 per cent by the end of the year.

He went on: “UK food and energy price inflation at least remains low compared to the rest of Europe, as well as the US, despite fears about the impact of Brexit. This partly reflects the strengthening of the pound over the last 12 months, especially against the euro, as the UK economy has rebounded more quickly than expected. In turn, this has helped to keep a lid on import prices.”

Figures from the Office for National Statistics this morning show that consumer prices increased by 3.1% in the year to September, down from 3.2% in August, when inflation hit a nine year high.