🔔 Did Taylor Swift keep inflation higher than expected?

Inflation as measured by the Consumer Prices Index (CPI) has remained at 2% for the 12 months to June 2024, keeping steady for the second month in a row. However, although maintaining at 2% means that once again inflation is exactly on target, the rising cost of living was expected to have eased slightly, so it’s actually a little higher than anticipated, which means that once again the Bank of England may well hold off on dropping the base rate at their next meeting on 1st August.

Prices in restaurants and hotels were the largest contributors to keeping inflation higher than predicted, with the price of hotels rising by even more than they did a year ago. On the other hand, prices of clothing and footwear actually fell over the last year, having increased the year before, offsetting some of the increases from restaurants and hotels.

A key part of the inflation data that the Bank of England keeps an eye on, is services inflation and the latest data shows that it too came in higher than expected – 5.7% instead of 5.1%. That said, there is some talk of so-called ‘Swiftonomics’ – the economic impact of Taylor Swift’s recent tour – causing a short-term spike in services inflation.

However, Sky’s data and economics editor Ed Conway discussed this on air with Kay Burley. He said that he hasn’t seen much evidence of 'Swiftflation’. “Looking at concert prices, that's actually gone down a bit. Hotels is up a bit, so maybe there's a factor there."

Economists at Capital Economics added that the Taylor Swift concerts “may have been behind some of the large rise in hotels inflation from 7% to 9.8%” but that “it looks as though only a small part of that [services inflation] may have been due to the temporary effects of Taylor Swift's concerts."

The bottom line is that overall services inflation is simply proving stickier than expected, regardless of Taylor Swift.

With inflation remaining subdued, this is good news for all, as it means that prices are rising less quickly than they have been over the last couple of years, but for savers the news is even better as the Bank of England could once again hold off on dropping the base rate, so savings rates continue to remain fairly stable.

At the moment, over 90% of savings accounts are paying a rate that is equal to or higher than 2% - meaning that it’s easier than ever to find an account that can keep up with the rising cost of living, even if you have already used up your ISA and pay tax on your savings. That said, 2% is a very uncompetitive rate in the current savings climate – you can do much better.

With 90% of savings accounts at least keeping up with, if not beating inflation, this does mean that there are also some very bad pennies out there. If you have your cash languishing in one of these poor accounts, not only are you missing out on the pounds that should be in your pocket, but the value of your cash could actually be diminishing in terms of purchasing power, if the interest you are earning is not keeping up with inflation.

The table below shows some of the top paying accounts, compared to the worst paying live accounts currently available. Even with a deposit of just £10,000 you could be missing out on hundreds of pounds a year, even if you have an account that is paying more than inflation – you may be able to do much better.

This shows just how important it is to pick wisely when opening a new savings account.

But even more importantly, make sure you know the interest you are being paid on your old savings accounts – ones that may have been forgotten by both you and your provider.

Although it’s almost a year since the regulator, the Financial Conduct Authority (FCA), introduced Consumer Duty and set out a 14-point plan aimed to encourage savings providers to pay fair value to their customers, shockingly there are still some savings accounts paying as little as 0.25%!

For example, the Virgin Money Everyday Access account, which is no longer available to new customers, is paying 0.25% - the same rate since April 2017!! If you have money in that account you’d earn just £25 a year on a balance of £10,000. More importantly after a year the spending power of your £10,000 would have fallen to just £9,828.

See how inflation could affect your savings with our Inflation Calculator

There are currently more great accounts than ever for savers to choose from, but don’t let choice paralysis and inertia stop you from earning the interest you deserve.