Inflation is going to go higher, and the government will have to do something about it. But what – and how?

It is a global problem – but each national government is responsible to its own electorate, writes Hamish McRae

The inflation crisis is principally driven by energy costs (EPA)

Step back a moment. The prediction by Citibank that CPI (Consumer Price Index) inflation will reach 18.6 per cent in January is a true shocker. It is way above the most recent forecast of the Bank of England of just over 13 per cent in the final quarter of this year.

If it proves correct, it will mean the UK will have significantly higher inflation than the US, where the markets seem to think that the 9.1 per cent rate reached in June may be have been the peak – the most recent figure there is 8.5 per cent.

As for Europe, the most recent official forecast predicts a peak of 8.4 per cent in the third quarter of this year for the eurozone, though for the EU as a whole the rate will be higher. In any case, that was before the current surge in gas prices, and there is a lot more inflation still to come through the economy.