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Inflation drops during August

Inflation drops during August

Category: Economy

Updated: 18/09/2012
First Published: 18/09/2012

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 It is now over 6 months old so the content may be out of date.

Official figures released today have revealed inflation fell from 2.6% to 2.5% during August.

Analysts believe that the dip in the Consumer Price Index (CPI) will continue over the next few months, in line with the Bank of England's target of 2%.

Lower inflation will also be a boost for savers who have seen their investments eroded by the effects of inflation.

Research by has revealed that a basic rate taxpayer would need to find an account paying at least 3.12% to beat the effects of inflation, an improvement on last month's figure of 3.25%. Higher rate taxpayers would need to achieve a rate of 4.20%.

For example, a £10,000 deposit invested five years ago would have a spending power of just £9,248 today.

Despite the fall in CPI, Sylvia Waycot, spokesperson for Moneyfacts, believes savers are still being punished by inflation.

"Although today's fall in inflation is welcomed, it does not alter the painful truth that in five years, the average saver has seen over £750 knocked off the spending power of their savings, the equivalent of just over £2 for a cup of coffee everyday of the year," she said.

"Once again, we have the ridiculous situation where we have more savings accounts that don't beat inflation than those that do."Today there are 1,017 savings accounts on the market, but only 198 (3 notice, 66 fixed rate bonds and 129 ISAs) accounts that negate the effects of tax and inflation. There are no no-notice accounts on the market that beat inflation."

The Retail Prices Index, which measures the cost of retail products, also fell during August from 3.2% to 2.9%, offering some hope to households struggling with high living costs.

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