United Kingdom | The squeeze on household finances intensifies

This week brought a double whammy of bad news for UK consumers. The energy price cap will rise by 54% in April, with the Chancellor offering an underwhelming package of support in mitigation. And the MPC raised Bank Rate to 0.5% while sending a clear signal that further hikes are imminent.

What you will learn:

  • Ofgem announced that the surge in wholesale gas prices means that the energy price cap will rise by 54% on April 1.
  • The MPC has also become increasingly concerned that a tight labour market will cause inflation to remain high, even after the temporary pressures from high energy and global goods prices have faded. 
  • We now expect CPI inflation to hit 7.5% in April, and Bank Rate to reach 1% by May. With the squeeze on household spending power intensifying, we will slash our forecast for 2022 GDP growth to around 3.7%, from 4.5% previously.

Topics: United Kingdom, Europe, Economic outlook, Inflation, Labour markets, Consumer, Pandemic, MPC, Covid19, Outlook, Energy prices, Bank of England, Bank rate, England

United Kingdom | The squeeze on household finances intensifies