🔔 Inflation falls below the Bank of England’s target and is now at a two-year low

Analysts were predicting that the rate of inflation would hit the Bank of England’s target of 2% in January but were perhaps surprised to see it fall to a two-year low.

The Consumer Prices Index (CPI) rate fell to 1.80% in January, from 2.10% in December – with the fall mainly driven by cheaper energy prices.

According to the Office for National Statistics (ONS), the largest downward contribution to the CPI rate was a fall in gas, electricity and other fuel prices.

The fall in energy prices appears to have coincided with the start of energy regulator Ofgem’s price cap, which came into effect from 1 January 2019. However, the effects of the cap may be temporary, as it is only effective until the end of March.

The downward effects were offset by rising ferry prices and air fares falling more slowly than the same period last year.

So, better news for those staying at home than those heading off on holiday!

Of course, this two-year low level of inflation means that there are far more savings accounts to choose from that match or beat inflation – read on for more details 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 the CPI measure should 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 predicted that inflation would hit the Bank of England’s 2% target as early as January’s inflation rate, but some may have been surprised by the level it fell to – few expected to see a two-year low figure announced.

In general, it seems to be doom and gloom in terms of economic predictions at the moment, with Brexit uncertainty playing a significant role in weakened consumer confidence and a reduction in business spending.

In last week’s quarterly inflation report, the Bank of England signalled that the base rate may not rise until the second half of 2020, amid a slashing of its growth forecast for this year.

So, it doesn’t look like the Monetary Policy Committee (MPC) will be considering an increase in the base rate any time soon and will continue to see how Brexit developments manifest before implementing any rise (or fall).

This aside, today’s announcement is good news for savers as a fall in CPI, combined with the fact that best buy savings rates continue to move in the right direction, means that there are many more savings 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.

Source: Savings Champion. Rates correct as at 13/02/2019

Sadly, it is still the case that many savings accounts are paying less than inflation - particularly older accounts and those held with the high street banks.

But you do not have to accept paltry rates - switching to at least mitigate the effect of inflation is far better than leaving the funds earning a pittance. By switching to the best possible rates, you can reduce the effect of inflation on your cash.

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.

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