Prime Minister Rishi Sunak is at risk of missing his flagship target to halve inflation this year, one of Britain’s leading economic forecasters has warned.
The National Institute of Economic and Social Research (NIESR) said the soaring price of food and other basic essentials meant inflation was on track to remain persistently high for the rest of this year.
It said the combined impact of the Covid pandemic and the ongoing fallout from the cost-of-living crisis meant Britain’s poorest households would be about £4,000 a year worse off as a result – significantly higher than for richer households.
The report said inflation will not return to the Bank of England’s 2% target until late 2025 with the current double-digit rate of inflation predicted to fall to 5.4% by the end of the year, falling short of the government’s aims.
The think tank’s forecast is also above the 3.9% inflation rate the Bank expected for the end of the year in its last projections made in February.
The institute said inflation would only fall to the Bank’s 2% target in the third quarter of 2025, making it more pessimistic than the Bank and the Office for Budget Responsibility (OFR), who think price growth will fall rapidly in the coming months.
The forecast comes ahead of the latest interest rate decision by the Bank of England today, in which it will also issue new forecasts for inflation.