‘Horrible squeeze!’ Britons issued stark warning as inflation predicted to climb to 11%

Gordon Brown issues warning about inflation and recession

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The forecast came last week as the Bank hiked up interest rates to a 13 year high of 1.25 percent. The Bank of England stated the new forecast reflects the “higher projected household energy prices” due to Ofgem’s increase to the price cap to £2,800. The bank highlighted that when the Government’s cost of living payments and energy support payments kick in in October they will most likely have to add another 0.1 percent points to inflation.

Sarah Coles, senior personal finance analyst, at Hargreaves Lansdown states due to weak Gross Domestic Product (GDP) data, growth in April fell by 0.3 percent.

GDP is one of the main indicators used to measure the performance of a country’s economy.

When GDP goes up, the economy is thought of as doing well. Negative growth, however, often brings with it falling incomes, job cuts and lower consumption.

Ms Coles explains this means that the UK will see a shrinking economy far earlier than the Bank of England expected in May and the UK will soon be entering “stagflation”.

Stagflation is when there is higher inflation alongside a shrinking economy.

Ms Coles detailed that due to the fact the Bank has to wrestle with “opposing forces” as it tries to avoid damaging the economy whilst keeping a lid on inflation, it will need to keep raising rates in the months to come.

Ms Coles said: “The horrible squeeze on all our finances is here to stay and it is highly unlikely to be the last of the rate rises.

“The market is now pricing in a rise to 2.9 percent at the end of the year and to 3.3 percentin 2023, and while this may be a bit punchy, it’s a strong indication of the direction of travel.”

As a response to inflation, many groups have argued for an increase in wages to help cover the cost of living however, Ms Coles said “raising wages is a double-edged sword”.

In April, after taking into account inflation, wages were down 2.2 percent in a year.

Those in the public sector saw a pay cut with pay only rising by around 1.5 percent.

Ms Coles stated public sector pay hasn’t dropped this low for almost five years.

She added: ”It’s no wonder that this year we’re expecting the biggest drop in living standards in a generation, as wages fall further behind inflation.”

As Britons try and weather the storm when it comes to their finances,

With the cost of living crisis looking here to stay, founder of MoneySavingExpert Martin Lewis published a “survival guide” blog post last month that detailed how Britons can weather the storm.

The post includes thrifty ideas such as using a slow cooker to batch cook food, cooking in a microwave and not an oven, and washing clothes the day before a hot day so a dryer doesn’t need to be used.

He also included a guide called “Heat the Human – not the home” which he described ways that people can cut down their heating uses.

Mr Lewis said: “I felt sad when I asked the team to put this new Heat the Human guide together, analysing the cheapest ways to keep warm.

“Yet I can’t ignore my overflowing email bag of people panicking that they can’t afford their energy bill.”

Mr Lewis stressed the importance of Britons checking if they are eligible to claim certain benefits as large numbers of people are missing out.

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