Inflation will accelerate to ‘astronomical’ levels

A leading think tank has warned that the UK will experience inflation of such “astronomical” scale that millions of savings will be offset by high living costs and taxes.

A report by the UK’s National Institute for Economic and Social Research predicts that the UK is headed for recession, with inflation coupled with the highest tax burden in seven decades leaving 5.3 million people without savings.

This Find From NIESR, by eraSaid the deepening economic crisis will leave about 7 million households living on “paying the check”, gasoline prices and food costs are expected to push inflation to at least 11% by the end of the year, while retail price indices determine rail fares and students The loan interest rate (RPI) is expected to reach 17.7%.

The report said the UK has entered a recession and the period of negative economic growth will continue into next year.

The think tank said the Bank of England may have to raise interest rates to 3% because of the gloomy economic outlook.

Institute Deputy Director Stephen Millard Say The UK economy will not be able to escape “astronomical inflation” in the short term, and “if we are going to lower interest rates, we need to raise them to the 3% mark”.

“It’s now up to the Monetary Policy Committee to make sure that inflation does come down next year, with the new chancellor supporting those households that have been hardest hit by the recession and the cost of living tightening,” Millard said.

NIESR goes on to forecast that below-inflation wage growth will feed into the economy by 2026, meaning the average worker will earn 7% less in real terms than before the inflation spiral that began during the coronavirus lockdown.

The think tank’s director Jajit Chada has called on government coffers to provide more financial support to the poorest sections of society, saying the next prime minister should “focus economic policy on reallocating resources to the most economically vulnerable households and maintaining public services” .

Foreign Secretary Liz Truss, the current front-runner in Prime Minister Boris Johnson’s campaign, has called for big tax cuts to help families cope with the rising cost of living.

Her opponent, former prime minister Rishi Sunak, argued that the tax cuts would fuel inflation and that paying for the lockdown — which he presided over — should not be deferred to future generations.However, Sunak back slightlysaid he would now actually support a cut in energy VAT.

Last month, the globalist International Monetary Fund told candidates in the Conservative leadership race that they should not seek tax relief for the British public, saying the UK should use the energy crisis as an opportunity to double its income and reduce green energy. expenditure.

Follow Kurt Zindulka on Twitter @KurtZindulka

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