The Bank of England will not get inflation back under control until the end of 2025 because of soaring food prices and a "concerning" rise in wages, according to Goldman Sachs.
The Wall Street giant predicted it will take at least two-and-a-half more years for policymakers to bring the headline rate back to its 2pc target from the current 8.7pc level.
It blamed a "more gradual decline in food inflation" and the UK's tight jobs market for the slower decline.
While Goldman said a sharp fall in gas prices will help bring down household energy bills significantly this year, it added: "food inflation, on the other hand, remains at record levels and has shown limited signs of slowing so far."
Ibrahim Quadri, UK economist at Goldman, added: "Given the tightness in the labour market, we remain concerned about the risk of wage growth not cooling sufficiently and sustainably over the medium term."
Goldman analysis shows there is roughly a six-month lag between any significant rise or fall in producer prices and its impact on the cost of the weekly shop. While this relationship suggests supermarket prices "should moderate going forward", it added that the decline was likely to be more "gradual" than usual.
It expects food prices to keep rising at an annual pace of at least 2.5pc until 2026.
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2023-05-30 09:36:10Z
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