Inflation holds steady way above 2% target - Economy - News - Moneyfacts

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Inflation holds steady way above 2% target

Inflation holds steady way above 2% target

Category: Economy

Updated: 17/08/2010
First Published: 17/08/2010

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The rate of inflation is proving to be resolute, with the measure falling by a mere 0.10% to 3.10% in the last month.

While it is the third month in a row that the rate at which prices are rising has slowed, the Consumer Prices Index remains way below the Government's target of 2%, and expectations are that it will remain so for some months to come.

A combination of high inflation and record low interest rates have made for a hostile environment for savers.

Making ends meet is set to get even tougher from the beginning of 2011, when the increase in VAT from 17.5% to 20% comes into force.

It is more important than ever, therefore, to make your money go further.

Darren Cook, spokesperson for Moneyfacts.co.uk, said that savings rates had hit a plateau and may stay there for some time.

"The average one year fixed bond rate has fallen from 3.07% in January to only 2.54% today and the average five year fixed bond rate has fallen from 4.56% to 4.08% for the same period.

"The average instant access savings rate is still at rock bottom at a rate of only 0.74%. The only trigger for any improvement in savings rates may be a surprise increase in the Base rate by the Bank of England, but this is most likely not to happen soon."

To stop savings pots effectively eroding away, a basic rate tax payer would currently need to find an account paying a rate of 3.88%.

There are currently 87 products on the market which fit the criteria, although a number of them require an additional, riskier account to be taken at the same time.

You must also be prepared to lock your money away for some time.

One of the best rates on the market is available from ICICI Bank, which offers a five year bond with a fixed rate of 4.75%.

Northern Rock and State Bank of India also offer decent long term rates, with their five year offerings paying 4.50% on savings.

If five years is slightly too long, then Barnsley BS offers 4.25% with its four year Online Fixed Rate Bond.

At the other end of the scale, ING Direct and Santander both offer a rate of 2.75% on their easy access accounts, while the Sainsbury's Easy Saver and the Halifax WebSaver Extra pay 2.70% and 2.60% respectively.

Find the best savings rates for you - Compare savings accounts

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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