UK inflation falls to a near three-year low of 2.3%

Despite the significant drop, figures are higher than economists expected, casting doubt over an imminent cut to interest rates.

UK inflation fell to a near three-year low of 2.3% in the 12 months to April 2024, the Office for National Statistics (ONS) today revealed. This rate was last slower in July 2021, when the cost of goods and services rose by a more meagre 2.0%.

With figures now closing in on the Bank of England’s 2.0% target, the Prime Minister, Rishi Sunak, remarked inflation has returned “back to normal” following the recent peak of 11.1% recorded in October 2022.

What’s bringing inflation down?

The falling costs of gas and electricity were largely responsible for slowing inflation this month; prices in these sectors dropped by 27.1% in the year to April 2024 – the largest decline on ONS records (dating back to 1989).

Meanwhile, the price of food and non-alcoholic beverages continued to decelerate for a 13^th consecutive month, rising by 2.9% in the year to April compared to 4.0% in March. This is down significantly from a recent high of 19.2% recorded in March 2023 – the highest annual rate seen in over 45 years.

What does this mean for savers?

Over 1,350 saving deals could better inflation at the time of the last CPI announcement and, following today’s news, there are now well over 1,500 options to choose from that deliver real returns on your cash.

There has been some volatility across the savings market in recent times, with a mix of rate rises and reductions across the piece. Changes substantially balancing one another out has led to average rates not changing a huge amount recently in the fixed rate arena. Savers who are about to have their existing one-year bond mature can beat the market-leader from May 2023, and those coming off longer-term deals should be able to achieve significantly higher rates if they wish to fix again.

Meanwhile, variable savings rates have remained very steady over the past few months, and this has continued in recent weeks.

As for ISA rates, these rose significantly during ISA season, especially in the buildup to the deadline for utilising allowances on 5 April. Beyond that date, average rates in the sector have settled down again. The top fixed ISAs are paying less than their fixed rate bond counterparts, with very few accounts currently paying over 5% as it stands.

As always, it’s vital that consumers consider all the options and be willing to switch if more attractive options are available. It is always best to review all relevant criteria, as eligibility and access are both important factors to take into account.