Citi Bank is predicting UK inflation could hit a peak of 18% in January if energy prices remain unchecked.
Earlier this month the Bank of England forecast inflation would peak at 13% this year with a year-long recession to follow.
In its latest report for July, inflation had already reached a 40-year high of 10.1%
However, the latest forecast from Citi Bank is even more severe and warned that the Consumer Prices Index (CPI) measure of inflation was expected to push the cost of living into the “stratosphere”.
In a note to clients reported by several agencies, Citi Bank chief UK economist Benjamin Nabarro said CPI was expected to keep rising sharply, hitting 14% in the autumn and then 18% in the New Year.
He added that the Retail Prices Index (RPI) measure, which is higher than CPI, could peak at more than 20%.
According to reports, Citi is expecting soaring fuel costs to continue for a further 12 months and predicts the current energy bill price cap of £1,971 will rise to £3,717 in October, £4,567 in January and £5,816 in April.
Nabarro told clients: “Our latest estimate, updated for the further 25% and 7% rally in UK gas and electricity prices last week, points to a further upside shift in UK inflation.
“Accounting for these developments, as well as updating our own weights for CPI/RPI and honing our own accounting for curve backwardation, we now expect CPI inflation to peak at over 18% in January. RPI inflation, we think, will peak at over 20%.”
The reports added that Nabarro told clients the bank is only expecting limited support and intervention from Liz Truss if she becomes the next prime minister.