Soaring gas prices might push UK inflation well over 20% next year according to new research from US investment bank Goldman Sachs (NYSE:GS).
"In a scenario where gas prices remain elevated at current levels, we would expect the price cap to increase by over 80% in January (vs 19% assumed in our baseline)," economists at the bank said in a note.
"(This) would imply headline inflation peaking at 22.4%, well above our baseline forecast of 14.8%."
Goldman also predicted the UK would move into recession in the fourth quarter of 2022 and contract by 0.6% compared to the consensus forecast of growth of around 0.2%.
Forecasts for interest rates are also gloomy, with Goldman predicting that the Bank of England will announce a 0.5% hike when it meets next month to take the base rate to 2.25%, though there is the possibility, it suggests, of an even sharper increase.
Goldman’s forecast follows other City firms, which have pointed out the devasting impact that soaring gas and electricity prices are having on both the UK and European economies.
Average UK bills rose by 80% last week when regulator Ofgem set the price cap for people paying by direct debit at £3,549 a year from October.
Ofgem reviews the cap every three months and if goes by 80% again in January, as Goldman predicts, it will rise to around £6,400.
Citibank last week predicted consumer price inflation would peak at 18.6% in January, with its estimates based on January gas prices of £4,567.