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The UK is bracing for an increase in inflation and unemployment rates as harsh winter weather across Europe has driven up gas prices. Analysts predict that inflation will rise to 2.8% in January, up from 2.5% in December 2024. The Bank of England expects inflation to reach 3.7% this year, while the National Institute of Economic and Social Research forecasts it will stabilize at 3.2% in 2025.
The situation is exacerbated by projections of the unemployment rate climbing from 4.4% to 4.5%, up from 3.6% in August 2022. Should current economic trends continue, experts warn that the UK could face stagflation characterized by high inflation and rising unemployment. However, some economists, like Rob Wood from Pantheon Macroeconomics, argue that the unemployment rate may remain at 4.5% with the Consumer Price Index (CPI) stabilizing at 3.1%.
The economic outlook remains shaky amid uncertainties surrounding global energy prices and potential geopolitical shifts, particularly regarding the Ukraine conflict, which could reshape gas and oil markets significantly.