Bank of England’s target within shooting distance as inflation falls

Author: Tom Adams
16th January 2019

Analysts hit the mark in predicting a fall in the rate of inflation to 2.10% in December, taking the rate to its lowest level for nearly two years.

Toy car

The Consumer Prices Index (CPI) rate fell to 2.10%, from 2.30% in November – with the fall mainly driven by a drop in petrol prices.

According to the Office for National Statistics (ONS), the largest downward contribution to the CPI rate was the fall in petrol prices and also air fares, where seasonal prices rose by less than this time last year.

These downward effects were offset by price rises in a number of other categories, including hotel accommodation and to a lesser extent, mobile phone charges, games, toys and hobbies, and not forgetting dry dog food!

So, good news when it comes to getting places in the car, but less so if you are staying overnight in a hotel when you get there!

The upshot for savers is that there are far more accounts to choose from that match or beat inflation – read on for more detail on the top-paying accounts currently available.

Of course, the key thing to remember is that inflation is a very personal thing – how and where money is spent varies considerably between individuals and so rising and falling costs can affect some more than others.

The CPI measure should only be viewed as a general indication of the prices of goods and services – only you really know how much your own costs are rising and by how much.

However, inflation can be an effective indicator of how things are going in the wider economy.

Economists have successfully predicted the last two inflation announcements and the consensus is that inflation will drop below the Bank of England’s 2% target as early as January’s inflation rate, which will be announced next month.

With falling inflation and the level now close to target, there is a good chance that the Monetary Policy Committee (MPC) will feel comfortable in hanging on until Brexit developments manifest before implementing any rise (or fall) in the base rate.

However, this is by no means the last we will hear on this subject and who knows what measures will need to be put in place in the not too distant future.

This aside, there is good news for savers as best buy savings rates continue to move in the right direction and, when combined with the latest fall in CPI, this means there are

This aside, there is good news for savers as best buy savings rates continue to move in the right direction and, when combined with the latest fall in CPI, this means there are many more accounts to choose from that match or beat the rate. A selection of the best rates from different categories are included in the table below.

Provider Account Name Gross Rate 
Current Accounts
TSB Student Bank Account 4.89%
TSB Classic Plus Account 4.89%
Nationwide FlexDirect Account 4.89%
Santander 1|2|3 Student Current Account* 2.96%
Tesco Bank Current Account 2.96%
Nationwide FlexPlus Account 2.96%
One year/ 18 month fixed term accounts
Al Rayan Bank 18 Month Fixed Term Deposit 2.30%
BLME 18 Months Premier Deposit Account 2.25%
Investec 18 Month Fixed Term Deposit 2.15%
Al Rayan Bank 12 Month Fixed Term Deposit 2.10%
Gatehouse Bank 1 Year Fixed Term Deposit* 2.10%
Two year fixed term accounts
Al Rayan Bank 24 Month Fixed Term Deposit 2.40%
Investec Bank 2 Year Fixed Term Deposit 2.35%
Tandem 2 year Fixed Saver 2.30%
Atom Bank 2 year Fixed Saver 2.30%
Axis Bank UK 2 Year Fixed Deposit Account* 2.26%
Three year fixed term accounts
Al Rayan Bank 36 Month Fixed Term Deposit 2.50%
Atom Bank 3 year Fixed Saver 2.40%
Tandem 3 year Fixed Saver 2.40%
Investec Bank 3 Year Fixed Term Deposit 2.40%
BLME 3 Years Premier Deposit Account 2.40%
Four year fixed term accounts
Vanquis Bank 4 Year Fixed Rate Bond* 2.50%
Ikano Bank Fixed 4 Year Saver Account 2.45%
BLME 4 Years Premier Deposit Account 2.45%
Masthaven 54 Month Flexible Term Saver 2.43%
Hodge Bank 4 Year Fixed Rate Account 2.40%
Five year fixed term accounts
Vanquis Bank 5 Year Fixed Rate Bond* 2.70%
Atom Bank 5 year Fixed Saver 2.70%
BLME 5 Years Premier Deposit Account  2.70%
Gatehouse Bank 5 Year Fixed Term Deposit 2.68%
Ikano Bank  Fixed 5 Year Saver Account 2.62%
Six/Seven year fixed term accounts
BLME 7 Years Premier Deposit Account 2.75%
Shawbrook Bank 7 Year Fixed Rate Bond Issue 2 2.40%

 

While you would have to tie your money up for at least a year to negate the effects of CPI inflation, those who need more access to their money still do not have to accept paltry rates - particularly from the big high street brands.

If you can't tie up your funds, switching to mitigate the effect of inflation is far better than leaving your funds earning next to nothing and by choosing the best rates, you are at least reducing the effect of inflation on money that you need access to.

Take a look at our independent best buy tables or call us on 0800 011 9705 for help finding the most suitable accounts for you.


*We are occasionally paid by some providers if you click through from our Best Buy Tables and open a savings or current account with them. We will never accept a payment that compromises in any way our independent, whole of market approach to providing information on savings products. For clarity we will indicate those companies who remunerate us with an asterisk (*).


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