Inflation rising higher than expected
December’s Consumer Prices Index has come out, showing that inflation is much higher than had been expected.
Although inflation was just 1.9% in November, it soared to an incredible 2.9% in December, far beyond the target level of 2% set by the government. That’s the biggest leap in CPI inflation ever recorded, according to the Office for National Statistics.
It’s not just shoppers who will be feeling the pinch, this is bad news for savers too, as only a few accounts are now paying enough interest to offset the effects of inflation.
You need to be earning at least 3.63% interest in order to gain any real benefit from your savings, or 4.84% if you’re a higher-rate tax payer.
However, none of the 261 easy access savings accounts for those saving £1,000 pay enough interest to overcome the effects of inflation and tax, so it’s really important to get the highest rate possible. The best deal available at the moment is Coventry Building Society’s First Class Postal account, paying a market-leading rate of 3.3%.
A real blow to savers
Kevin Mountford, head of banking at moneysupermarket.com, said: “The inflation announcement is a real blow to savers who are finding it extremely hard to find a suitable place for their hard earned cash.
“When looking to choose a suitable savings product it is easy to forget the impact inflation can have, so it’s vital savers keep a close eye on how their account stacks up. Inflation was dwindling for much of last year but today’s numbers show it’s very much back on the agenda and savers really have to be proactive to find the right deal.”