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Rachel Springall

Finance Expert & Press Officer
Published: 21/06/2023
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UK inflation, which is used to measure how prices increase, rose at a rate of 8.7% in the year to May, according to the Office for National Statistics (ONS). This means it remains unchanged from the 12 months leading to April.

Grant Fiztner, Chief Economist at the ONS, said inflation remains at a historical high and highlighted the rising price of airfares, second-hand cars, live music events, and computer games as reasons why the cost of living remains elevated.

"These were offset by a fall in the cost of petrol. Food price inflation remains high, but the rate has eased slightly this month with costs rising more slowly than this time last year,” he said.

Last year the rising cost of energy was a driving force behind the increase in prices, but this year elevated food costs have played a role in keeping inflation above the Bank of England’s target.

In the 12 months to May, food inflation rose by 18.4%, down from 19.1% in the same period to April.

This doesn’t mean food is becoming cheaper, instead it means prices are rising at a slower pace.

Core inflation on the rise

Core inflation, which strips out energy, food, alcohol, and tobacco prices, continued its upward trajectory and rose by 7.1% in the 12 months leading to May. In comparison, it rose by 6.8% in the 12 months to April.

Core inflation is now at its highest since March 1992. 

Some economists use core inflation as a key indicator of rising prices because energy, food, alcohol, and tobacco prices can be volatile. This means core inflation can be used to assess “the underlying inflationary pressures in the economy”, according to the ONS.  

In the EU and the US, core inflation is decreasing.

What is inflation?

Inflation is used to measure the rate at which prices are rising. You can read more about inflation and how it affects your personal finances in our guide.

What does this mean for your savings?

It is expected more base rate rises are imminent, so it’s worthwhile for savers to prepare themselves and keep abreast of the latest deals to hit the market.

Savers will find much better rates to choose from compared to a few weeks ago, but such high inflation continues to erode the true spending power of savers' cash.

However, high inflation must not discourage savers from reviewing their accounts and switching, as they could find a much better return now, particularly if they have a maturing fixed rate bond. It is true that over two years have now passed since any standard savings accounts could beat inflation, but it is worth remembering that in 2021 we also saw average savings rates fall to record lows.

Despite high inflation, it’s imperative savers make every effort to secure a better deal and act with pace to take advantage of a top rate.

Easy access savings accounts have continued to flourish this month, with many challenger banks and building societies improving their offers, as we witness both competition and influences from the Bank of England base rate rises.

Savers can now secure a top easy access rate of around 4% gross, which is more than double the top return on offer a year ago. However, it’s vital consumers carefully check the terms and conditions of these accounts, as some can restrict withdrawals.

There has also been heated competition across fixed rate bonds, with notable rises to one-year fixed deals. Savers will find the top one-year fixed bond pays more than double the equivalent top deal this time a year ago.

Challenger banks currently offer some of the top returns, and the market remains a fast-paced environment, with some raising rates more than once in a week. Deals offered by a challenger bank can change quickly when they meet their funding targets, so there is no guarantee a top rate will be around for long.

Some savers may only be prepared to invest their cash over the shorter-term or even in a flexible account, but there are still notice accounts and longer-term fixed bonds, as well as their ISA equivalents, to consider too.


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