The National Institute of Economic and Social Research forecasts…

“In our central case forecast scenario CPI inflation peaks at 10.8% in the fourth quarter of 2022. A combination of slowing growth in international energy prices, monetary tightening, wage restraint and falling real incomes sees it fall to 3.3% by the end of 2023. RPI inflation is forecast to reach 17.7% in the fourth quarter of 2022. The MPC will need to continue to be cautious as it walks a fine line between tightening policy too quickly, worsening the recession, and too slowly, increasing the risk of high inflation becoming embedded in expectations. Our central case scenario assumes that the MPC sets a path for the Policy Rate in line with market expectations as of 8 July, up to the third quarter of 2023, after which it stays flat (Figure 1.22). This path delivers a fall in inflation back to target together with a relatively mild recession.”