When you subscribe we will use the information you provide to send you these newsletters. Sometimes they’ll include recommendations for other related newsletters or services we offer. Our Privacy Notice explains more about how we use your data, and your rights. You can unsubscribe at any time.
The Consumer Price Index (CPI) measure of inflation was 2.1 percent in May. This is up from 1.5 percent in April, the Office for National Statistics (ONS) data has shown.
This means the rate of inflation is now above the Bank of England target of two percent.
The rate of inflation hasn’t been this high for two years, since April 2019.
Savers are being warned it’s no longer possible to match or beat inflation in any standard bank account, however long a person is prepared to fix their money for.
Sarah Coles, personal finance analyst at Hargreaves Lansdown commented: “Inflation has bust the Bank of England target, as lockdown lows in 2020 fed into bumper price rises over the past 12 months.
“Petrol has risen by almost a fifth, while clothing has seen its biggest rise in three years.
“Spenders are feeling the pain in their pockets, and over the longer term, savers will see it eat away at the value of their savings too.
“The Bank of England was always expecting inflation to overshoot its target this spring, but it has taken the position that this is a short term blip caused by rock bottom prices a year earlier, and as soon as they naturally fall out of the figures, inflation will drop away again.
“It isn’t worried by the rise and it isn’t expecting to raise interest rates in the immediate future to bring it back down again.
Employment crisis as number of older working women continues to fall [INSIGHT]
Rishi Sunak urged to help as self-employed set to face ‘sharp blow’ [UPDATE]
Barclays scam warning as Britons bombarded by fraudulent calls [WARNING]
“This is good news for borrowers, but brings yet more misery for savers.
“It means we can’t expect savings rates to rise across the board any time soon, and we need to track down the best deals on the market today.
“If you’re in an easy access account with a high street bank you can still get over 110 times the interest in an account fixed for two years with a smaller and newer bank.”
Ms Coles went on to discuss the impact on savers in further detail.
“At the moment, no normal savings accounts can keep pace with inflation, not even if you tie your money up for five years or longer,” she said.
“You can do so in a regular saver account, but these tend to be linked to current accounts, and accept relatively small monthly payments, so if you want to switch a lump sum you’re out of luck.
“However, it doesn’t mean we should give up trying to make the most of our savings, because you can still get 50 times the interest just by moving from your high street easy access savings account paying 0.01 percent to one with a newer online bank.
“This should be the home for your emergency savings of three to six months’ worth of essential expenses (or one to three years for those in retirement).
“We should also be bucking the trend towards leaving all our savings in easy access, especially now that fixed rate savings accounts, fixed for one, two or three years, have become more competitive in recent weeks.
“Smaller and newer banks have needed to top up their assets and attract more funds at roughly the same time, so we’re seeing them jostle for the top of the price comparison tables.
“This won’t last forever, so it’s worth taking advantage of these rates while you can.”
The personal finance analyst also pointed out investment may be an option for some, although it’s crucial to be aware with investing, capital is at risk.
“For money we plan to hold for five to ten years or more, it’s worth considering investment,” she said.
“The value of your money will rise and fall over the short term, but over the long term it stands a far better chance of staying ahead of inflation.”
Source: Read Full Article