After forecasting a recession in the UK economy last week, economists from the US investment bank Goldman Sachs warned on Tuesday Inflation in Britain could exceed 20% early next year if spiraling gas prices fail to recede.

Also read: UK economy will enter recession in Q4 but will be relatively mild – Goldman Sachs

Key quotes

"In a scenario where gas prices remain elevated at current levels, we would expect the price cap to increase by over 80% in January (vs 19% assumed in our baseline),"

"(This) would imply headline inflation peaking at 22.4%, well above our baseline forecast of 14.8%."

“The BoE looks set to raise interest rates by 50 basis points to 2.25% next month,” adding that “it saw upside risks to its forecasts for additional 25 basis-point hikes in following policy meetings.”

This comes after economists from Citigroup said that UK inflation was set to peak at 18.6% in January.