UK inflation could drop to 2% this year, says Citi

Investment bank Citi said on Wednesday (22 February) that inflation could fall to 2.3% by November of this year.

This is below the Bank of England’s own estimate of a drop to 4% by Q4.

Citi’s chief UK economist Benjamin Nabarro, he now expects UK headline inflation to slow to below 5 per cent from July. Only a month ago he expected that to happen in October.

Nabarro also said the fall in European gas prices has prompted the bank to rethink and republish its inflation forecasts.

Since July 2022 inflation has been in double digits, reaching an 11.1% peak in October. EY Item Club predict that inflation will fall to just under 4% this year.

As the inflation outlook becomes less concerning, the EY Item Club thinks it is likely that the Monetary Policy Committee will press pause on its rate hiking cycle soon.

“That inflation could fall to 2% by the end of the year isn’t implausible,” Martin Beck, chief economic adviser to the EY Item Club told the Guardian.

“The ongoing and substantial decline in wholesale energy prices should translate into falling household bills in the second half of this year, while lower commodity prices and shipping costs will also gradually feed through into prices in the shops.”