The threat to British living standards from the Iran war is becoming clearer with growing warnings of more expensive petrol, energy bills and mortgages.
The International Monetary Fund (IMF) has predicted that the UK economy will take a bigger hit from the conflict than that of any other major country.
In its world economic outlook, the fund forecast that Britain’s GDP will grow by only 0.8 per cent this year, down from a previous projection of 1.3 per cent.
It also said that inflation would touch 4 per cent, averaging out at 3.2 per cent for the year as a whole, against the Bank of England target of 2 per cent – with interest rates staying higher as a result – and that unemployment would keep rising towards a peak of 5.6 per cent.
Even if the war in the Middle East comes to an end relatively soon, most economists believe that the effects on everyday life – now nicknamed “Trumpflation” – will remain for some time.
Fuel prices
The cost of a litre of petrol in the UK has risen by nearly 20 per cent since the start of the conflict, with diesel up by more than a third, as a result of a spike in the global wholesale price of crude oil.
The IMF expects that oil prices will start to fall back later this year and continue falling in 2027, but still with an overall increase of more than 20 per cent for the year.
Daisy Cooper, the deputy leader of the Liberal Democrats, said: “People in Britain are already feeling the pressure at the pump, and now it’s clear that we’re in line for a huge hit to growth and even higher prices on the shelves.”
Fuel duty is scheduled to start rising from September, unwinding a “temporary” 5p-a-litre cut introduced by Rishi Sunak in 2022, but the Government has signalled that this increase could be abandoned if petrol prices remain at their current level.
Heating bills
Natural gas prices are set to be even higher than oil prices this year, according to the IMF, which will particularly affect Britain.
Its chief economist, Pierre-Olivier Gourinchas, said: “The UK is highly reliant on gas for its energy mix, now a lot of this gas is produced domestically but there is still a part of it that is imported, and the part that is imported is at market prices, it’s much more expensive, and that kind of sets the price for energy in the UK in an environment where gas reserves are relatively low when you compare them to other European countries.”
The IMF has predicted that the UK economy will take a bigger hit from the conflict than that of any other major countryThe cost of domestic energy bills are fixed until the end of June under the price cap enforced by the regulator Ofgem.
But from July, they will rise by an estimated 13 per cent, the research firm Cornwall Insight is predicting – an increase of nearly £20 a month for the typical household.
Mortgage rates
Before the Middle East crisis, the Bank of England was widely expected to keep cutting interest rates from their current 3.75 per cent.
But rates could now go up rather than down. Susannah Streeter of Wealth Club said: “One to two interest rate increases are now being priced into financial markets.”
Gourinchas urged central banks not to hike rates in a knee-jerk response to temporary inflation, but admitted that higher borrowing costs could be necessary in the near future to tame the pace of price rises.
Mortgage markets are in turmoil with products being withdrawn and replaced unusually quickly, reflecting the difficulty in predicting where interest rates will settle over the course of this year.
Pressure for financial help
Economists said the increased household costs would put pressure on the government to help with the cost of living – but it would be limited in what it could afford to do.
Streeter added: “”As households are set to struggle under a toxic combination of higher fuel prices, energy bills, mortgage payments and food costs, the pressure will increase on the government to provide more support.
“However, given how stretched the public finances already are, it’s highly likely that specific help will be reserved for the most vulnerable this winter. The phased re-introduction of higher fuel duty from September is also set to come under intense scrutiny and the clamour to delay this rise will intensify.”
Ruth Gregory, economist at Capital Economics, said: “he UK is heading into this energy price shock with its public finances in a fragile position. This means the government’s support will need to be relatively small and targeted towards those that need it most. Reeves also won’t want to announce a big fiscal package that adds to the already extensive inflationary.”
Hence then, the article about the three ways trumpflation will hit your pocket was published today ( ) and is available on inews ( Middle East ) The editorial team at PressBee has edited and verified it, and it may have been modified, fully republished, or quoted. You can read and follow the updates of this news or article from its original source.
Read More Details
Finally We wish PressBee provided you with enough information of ( The three ways ‘Trumpflation’ will hit your pocket )
Also on site :
- 90 Years Later, the World's Most Famous Photo Exposes the Dark Side of Viral Fame: 'I Wish She Hadn't Taken My Picture'
- ‘We have to be able to walk and chew gum’ on government spending, says budget chairman on debt crisis and national security
- Businessman sues British Airways for £50k claiming cut finger caused ‘nightmares and flashbacks’