Steph McGovern

Well, cheers, Greg, and thank you for powering this episode of The Rest Is Money.

Hello and welcome to The Rest Is Money with me, Steph McGovern.

Yeah, so it's interesting this.

They have done a forecast and this is the first one since the Iran war broke out.

And it's essentially looking at three scenarios of how the war, how the unrest in the Middle East, the energy and oil prices will hit the UK economy.

And they all centre around how long energy and oil prices stay high.

Now, the bad news is none of them are good and they all involve living standards getting worse.

But there's different levels of severity in terms of the impact.

So...

they've done this as A, B and C. Now A is the mildest outcome.

So this is where energy prices will fall back sooner rather than later.

Inflation will peak at about 3.6% by the end of the year.

And although that's not ideal, it won't lead to any kind of spiralling.

And what I mean by that is households and firms changing their behaviour.

So people asking for

Pay rises or spending less because they've got less money or firms putting up prices because they're paying higher costs.

So in that first scenario, it's likely the second round effects won't be as strongly felt.

So things will kind of get back to normal sooner, although inflation will still go up.

The second scenario B, that's the most likely one, is what the Bank of England is saying.

And this is where oil and gas stays higher for longer, so therefore pushing inflation again higher this year.