Inflation stuck at 3% last month even BEFORE the Iran war began – as economists warn energy costs spikes could cause global recession with ‘1970s style Stagflation’
It was announced today that inflation remained at 3 percent even before the Middle East war started last month.
Although the headline CPI rate was in line with market expectations, it was still well above the Bank of England’s 2 per cent target.
However, hopes that price increases would follow a downward trend were dashed due to the chaos triggered by the US-Israeli attacks on Iran.
Rachel Reeves said: ‘In an uncertain world, we have the right economic plan that takes a responsive and responsible approach to supporting working people in the national interest.
The headline CPI rate was in line with market expectations but was still well above the Bank of England’s 2 per cent target
Rachel Reeves admits government faces ‘uncertain world’
‘We’re cutting £150 off energy bills and providing targeted support to those facing higher heating oil costs. ‘We are also acting to protect people from unfair price increases if they occur, to reduce red tape to reduce food prices at the till and to improve long-term energy security, creating a stronger, safer economy.’
Economists have been tearing up previous forecasts in recent days and warning that the US-Israeli war with Iran is clouding the economic outlook.
The Bank of England said on Thursday that recent increases in wholesale energy costs will delay CPI inflation’s return to target as it already sees high fuel prices.
It now expects inflation to be around 3% in the second quarter of 2026, down from February’s forecast of 2.1%.
Central bankers emphasized that the situation was fluid and events over the next six weeks could shed light on the extent of the disruption and its impact on prices.
Economists have weighed in with their own forecasts for where inflation might go if events continue.
Mr Allenby said he expected CPI inflation to exceed 4% in the second half of 2026.
‘Based on our updated assumptions, we now forecast a much sharper rise in oil prices, while higher wholesale gas prices lead to a 19% increase in the Ofgem energy price cap in July,’ he said.
Pantheon Macroeconomics agrees that CPI could head to 4% later this year if the recent rise in gas prices continues.
