Inflation will begin to fall to more manageable levels by the end of this year, the Bank of England has predicted.
In a report published on Thursday, the Bank of England (BoE) said it expects inflation to fall from 10.1% in January to around 4% by the end of this year.
In the report, the BoE said this dramatic fall would be because the sharp rise in wholesale energy prices that happened last year will be factored out of CPI inflation calculations.
While still high, energy prices have fallen dramatically from their peak in September and October last year.
The bank warned there "are considerable uncertainties around this outlook" and said the risk of more inflation was possible.
They also said the current tightness of the labour market, which could lead to employers offering higher wages, could also have an impact on inflation.
If inflation did hit 4% by the end of the year it would still be double the BoE's target of 2%, but it would be welcome news for prime minister Rishi Sunak who pledged to half inflation this year.
The report predicted inflation would hit 2% in late 2024.
The BoE has been aggressively hiking interest rates in the past few months to combat inflation, which currently sits at 4%.
The report was based on the Monetary Policy Committee's latest assessment of the UK economy.
It said the expected the fall in GDP over the coming months would be far shallower than previously thought and predicted the economy would grow by 1% this year.
Falling energy prices have led to speculation the government may backtrack on its plan to raise the energy price cap to £3,000 from the current £2,500.
The hike was announced by chancellor Jeremy Hunt when he attempted to reign in government spending.
But since the price of energy has fallen so dramatically – although is still above pre-2021 levels – the policy has become much less expensive.
The cap is still scheduled to be raised in April and would lead to the average bill going up by 20% a year, which would be unaffordable for many.
Moneysavingexpert Martin Lewis predicted earlier this week there was a "50/50" chance the government would scrap the rise.
Speaking to LBC on Monday he said: "Politically, it's not a very clever move either. It's the government that sets prices, not the regulator, not firms. And it's the government that will be putting them up 20% in April if it happens."
Although falling inflation will be welcome for many most people will still be experiencing price rises, especially when buying food.
At the end of January food inflation was sitting at 16.8%, the highest level since 1977.