The latest inflation figures have shown that the Consumer Prices Index (CPI) remained unchanged last month at 2.7%, whilst the Retail Prices Index (RPI), which includes the cost of housing, rose slightly from 3% to 3.1%.
It is the third month in a row that CPI has remained unchanged and is in line with market expectations, despite being above the Bank of England’s 2% target.
Higher gas and electricity prices
The data from the Office for National Statistics (ONS) shows that rises in gas and electricity prices of 5.2% and 3.9% respectively, as well as above average increases in the cost of food and non-alcoholic drinks, were offset by falls in the cost of fuel and air travel.
The outlook for inflation remains mixed, with some experts pointing to a generally weak economy, which help to reduce the rate of inflation, whilst others have suggested that inflation may continue to rise as higher energy and food costs are factored into the calculations. There is also a lingering fear that the Bank of England’s Quantitative Easing program could still push the rate of inflation higher in months to come.
Savers hit hard
Despite CPI remaining unchanged for the past three months, savers are being hit hard by a combination of inflation and falling interest rates.
The Funding for Lending Scheme has given banks and building societies access to cheaper finance, allowing them to reduce the interest rates they pay on their savings accounts. Even banks and building societies who have not signed up for the scheme are reducing interest rates in line with their competitors, doubling the misery for savers.
For basic and higher rate tax payers there are currently no savings accounts which pay an interest rate, after tax, which will beat inflation.
Cash ISA (Individual Savings Account) investors and non-tax payers can find a handful of accounts which beat inflation if they scour the best buy savings account tables , however such deals are few and far between and must be under threat as banks and building societies continue to take advantage of the Funding for Lending Scheme.
Our team of Independent Financial Advisers in Nottingham are experienced in advising savers on their cash options, if you would like advice on your options call one of our IFAs today on 0115 933 8433, alternatively enquire online or email email@example.com