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Image of Rachel Springall

Rachel Springall

Finance Expert & Press Officer
Published: 15/02/2023
Pound coins in a stack

While fuel prices fall further, the cost of food remains stubbornly high.

UK inflation, which is used to measure how prices increase, rose at a rate of 10.1% in the year to January, according to the Office for National Statistics (ONS). In comparison, inflation rose by 10.5% in the 12 months leading to December.

Despite slowing for a third consecutive month, it remains at a near 40-year high.

“While any fall in inflation is welcome, the fight is far from over,” said Chancellor Jeremy Hunt.

“High inflation strangles growth and causes pain for families and businesses – that’s why we must stick to the plan halve inflation this year, reduce debt and grow the economy,” he said.

The ease in the rising cost of living largely came from another slowdown in fuel prices. In addition, the price of restaurants and hotels also made a downward contribution to the overall rate of inflation.

Meanwhile, the price of alcohol and tobacco prices increased and made an upwards contribution towards this figure. In the 12 months leading to January, the price for these particular goods rose by 5.1% compared to the 3.7% rise seen in the year leading to December.

While these were notable movements in prices this month, the rise in food prices remains stubbornly high at 16.7% in the 12 months leading to January. This was a slight drop from the 16.8% rise in the 12 months leading to December.

Are prices going down?

The general price of goods and services aren’t going down, this data suggests it is rather rising at a slower pace.

What does this mean for your savings?

Savers will need to act quickly to take advantage of the latest deals as some of the top savings’ rates have tumbled over the past month.

The shorter-term fixed rate bond market has been impacted by various rate movements among challenger banks which sit highly within the top rate tables, showing yet another month in which these institutions are jostling for positions.

However, Cash ISAs have improved across a variety of sectors this month, with new market-leading rates to entice savers who have yet to use their ISA allowance.

Those savers who want to tie up their money in a fixed rate bond today for a year will be able to earn around 4% based on the top rate deals, which is around three times the return that they could have earned a year ago.

Fixed bonds continue to be offered by many challenger banks, as they tend to offer enticing rates to draw in balances to fund their future lending. As we reported a month ago, the top returns on many fixed rate bonds are coming down, but it’s still worthwhile for savers to compare deals now and secure a top rate to avoid disappointment.

Inflation is predicted to come down to around 3% in 2024, according to the Bank of England, and based on today’s top rates, savers would be able to make a return on their cash. However, as it stands there is not one single standard savings account that can outpace the current rate of the inflation.

It is expected that variable interest rates will continue to improve due to competition and the consecutive base rate rises fuelling the market. Savers who have not checked their existing rate would be wise to do, as not every provider has passed on each single base rate rise.

As the Bank of England base rate stands at 4% it is vital consumers take time to compare the latest deals on the market and sign up to rate alerts for any table-topping rates.


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