Mild consolation for savers as inflation falls - Savings - News | moneyfacts.co.uk

News

Moneyfacts.co.uk News brings you the latest financial & economic news & reviews of the best products in the UK by our team of money experts.

Mild consolation for savers as inflation falls

Mild consolation for savers as inflation falls

Category: Savings

Updated: 15/06/2010
First Published: 15/06/2010

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 It is now over 6 months old so the content may be out of date.
Long suffering savers were given some brief respite today as it was announced that inflation has fallen from April's 17 month high.

The Consumer Price Index fell from 3.70% to 3.40% in May, although that is still way above the Government's target of 2%, and a level that is having an adverse effect on a number of savings pots.

The wider rate of inflation, the Retail Prices Index, also fell, from 5.3% to 5.1%.

A basic rate tax payer would need to find an account paying 4.25% to combat the effects of inflation, and there are 27 accounts on the market that do so, although the majority require savers to sign up for a longer term, riskier product.

Having to find an account paying a markedly higher rate of 5.67%, tax payers paying a higher rate of tax have an even harder task on their hands.

Those that rely on their savings to supplement their income have been hardest hit by the high level of inflation that has typified recent months.

While the Bank of England has targeted getting RPI down to 2% in the next two years, the measure could still fluctuate either way in the short term.

"Savers will be hoping that inflation does not peak too high, but they could be rewarded with a rise in bank base rate and better savings rates," commented Darren Cook, spokesperson for Moneyfacts.co.uk.

Today's fall was largely dictated by falls in the prices of food and non-alcoholic drinks, said the Office for National Statistics.

A slow down in the rise in fuel prices also contributed to the fall.

Amongst the accounts which pay more than the 4.25% needed for basic rate tax payers are five year bonds from ICICI Bank, which offers 5%, and the State Bank of India, offering 4.50%.

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 Any products featured may be withdrawn by their provider or changed at any time.

Close