(AOF) – Steven Bell, chief economist for the EMEA region of Columbia Threadneedle Investments, says inflation is expected to fall towards 3% by the end of the year in the United Kingdom and Europe but does not expect to a reversal of the rise in interest rates. “The impact is expected to be particularly strong in the UK. We expect Chancellor Jeremy Hunt to reverse the energy price cap increase to £3,000 which was due to come into effect in April. “, says the economist.
“There is a good chance that the current cap of 2,500 pounds will not be binding from July. Actual prices could be closer to 2,000 pounds. These prices are all much higher than before the invasion of Ukraine by Russia, but the outlook has improved significantly in recent weeks and months, Bell said.
Favorable weather conditions are partly responsible for this. But European and British gas prices have also fallen for next winter. They have halved since the beginning of December. The powerful forces of supply and demand work well.
Fiscal deficits will also benefit. Germany has allocated the colossal sum of 200 billion euros, or 5% of its GDP, to its energy pricing system. She should only spend a fraction of that amount.
Lower inflation does not mean lower interest rates for Steven Bell. “As the impact of soaring energy prices fades, rising wages are forcing the Bank of England (BoE) and the European Central Bank to maintain tight monetary policy. It is possible that the recession real estate in the UK leads to higher unemployment and does the work of the BoE for it, but I think the easing of the cost of living crisis will offset this Europe will also benefit from the improved outlook of global growth”. concludes the economist.