INVESTMENT bank Citi has predicted that UK inflation is on course to rise to 18.6% in January – the highest peak in almost half a century.
Last month, the increase in prices of food and household staples saw inflation reach its highest level in over 40 years as it soared to 10.1%.
Citi said its latest prediction could be attributed to rising wholesale gas prices.
The investment bank predicted that the retail energy price cap would be raised to £4657 in January and then £5816 in April, compared with the current level of £1971 a year.
It said these shifts would lead to inflation “entering the stratosphere”.
Chief UK economist at Citi Benjamin Nabarro said: “We now expect CPI inflation to peak at over 18% in January.”
This would be higher than the peak of inflation after the second Opec oil shock of 1979 when it reached 17.8%, according to estimates from the Office for National Statistics.
In response to the latest estimates, the Scottish Greens have called on the UK government to reverse the energy cap rise.
Their economy spokesperson Maggie Chapman MSP said: "With runaway inflation, skyrocketing energy prices and a disastrous Brexit that is hammering our trade, it is clear that the Tories can't be trusted with our economy.
"They have no new ideas. This is a social emergency and without radical change the human cost will be brutal.
"The Tories are telling us that inflation is being caused by working people wanting the pay rises they are entitled to, yet prices are rising while wages are flatlining.
"The energy companies are making record profits while their customers are forced to choose between freezing and starving."
The Scottish Greens also want Westminster to bring back the £20 universal credit uplift which was removed, and called for them to double it.
Chapman added: "Things cannot go on like this. It must not be ordinary people who are made to pay the price for this crisis.
"It has to be the super-rich who are profiting from it and the fossil fuel giants who have led us here."
A rate of inflation this high would squeeze incomes hard and further push the UK economy into recession.
Nabarro said the scale of the likely inflation would mean the Bank of England had to further tighten their monetary policy.
UK and European wholesale natural gas prices are already trading at close to ten times normal levels.
On Friday, energy regulator Ofgem will announce the energy price cap for the period between October and January.
Most analysts believe this will rise to more than £3500 for a household – an increase of 75% on current levels.
Citi say forecasts for 2023 are looking to be “substantially greater”.
On Sunday, First Minister Nicola Sturgeon said that many families would be facing “destitution and devastation” if household energy prices increase.
Energy policy has been a regular talking point as Rishi Sunak and Liz Truss go head to head to determine who will succeed Boris Johnson as prime minister.
Allies of Truss have said she is likely to introduce a package of support alongside tax cuts.
Sunak’s team has criticised this approach, saying: “Truss cannot deliver a support package as well as come good on £50 billion worth of unfunded, permanent tax cuts in one go.”
