Surging energy costs could push UK inflation above 4% next year, double the central bank's target.

Institutional economic research says that because the Iran war has pushed up wholesale power and gas prices, UK household energy bills are expected to jump by about 25% in January, further intensifying inflationary pressure across the wider economy. Forecasts show that higher energy costs mean UK inflation could rise above 4% next year, double the Bank of England's target. The forecasts also show that the energy price capthe limit set by regulator Ofgem on what suppliers can charge householdsis expected to rise by about 427, taking the average household annual bill to around 2,150. That would bring bills close to the 2,500 cap introduced by the government in 2022 after the Russia-Ukraine conflict. At the time, market prices were much higher, but the government subsidised the difference so that a typical household only had to pay the capped amount. This support cost the government about 21 billion. The government is currently considering further measures, including extending the 150 "Warm Home Discount" to groups currently not eligible, possibly including some disabled people, carers and pensioners. Such measures could be announced in the October Budget and take effect in winter.