🔔 Predictions wide of the mark as inflation hits six-month high

Inflation unexpectedly rose in August to 2.70%, the highest level it has been since February 2018 and has now risen for the second month in a row.

Economists were expecting the Consumer Prices Index (CPI) rate to fall slightly to 2.40%, from 2.50% in July – but rising prices for recreation, transport and clothing pushed the rate in the opposite direction.

According to the Office for National Statistics (ONS), the largest upward contribution to the change in the CPI rate was in the recreation and culture category, where theatre tickets and the price of computer games increased by more than they did last year.

Also on the up were sea and air fares, though the overall rising transport prices were offset partly by a small downward contribution from motor fuels.

The final large upward effect came from the expected seasonal rising price of clothing, as autumn ranges started to appear in the shops.

On the flipside, furniture, household equipment and maintenance prices rose by less than last year – so maybe better news for those planning a DIY spree.

So, bad news for theatre goers, gamers and those travelling overseas – as well as those overhauling their autumn wardrobe – better news for DIY enthusiasts!

Of course, inflation can be a very personal thing – what you might spend your money on could be completely different to the next person.

Your personal inflation rate is probably very different to the CPI measure, so should only be viewed as a general indication of rising costs – only you really know how much your costs are rising by.

But these figures can be a good overall indicator of how things are going in the wider economy.

For savers, the bad news is that a rise in inflation means that there are fewer accounts available that match or beat the CPI rate, as you can see from the table below. You will need to tie your money up for at least five years to ensure that your money is not losing value in real terms.

Just two accounts currently beat inflation, BLME* and PCF Bank each pay 2.75% on their seven year bonds.

Take a look at our fixed rate bond and Sharia account best buy tables for more on these accounts.

In addition, there are a handful of interest-paying current accounts and children’s savings accounts that could be used to counteract the effects of inflation - albeit usually for smaller amounts.

However, as we have seen, inflation can vary month to month and so trying to keep pace with it on your savings can be problematic – so the answer is to look at the best possible rates on the market to at least mitigate the effects of inflation.

You may struggle to match or beat the rate of inflation, but there is no reason not to maximise your returns. Take a look at our independent best buy tables or call us on 0800 011 9705 for help finding the most suitable account for your circumstances.

Whether you are a theatre-goer or a DIY enthusiast, better returns are likely to be available for your savings.

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