CPI Inflation fell to 2.3 per cent in April, which, combined with new fixed rate savings accounts coming on the market at the moment, is providing savers some breathing room, moneynet.co.uk has said.
The Office of National Statistics announced this week that the consumer price index (CPI) fell from 2.9 per cent in March, which means that at the very least savers will be able to find a savings account
where the spending power of their money can be preserved.
With interest rates
plummeting over recent months, savers have found themselves earning a lower rate of interest than the rate of inflation, essentially reducing the value of their cash. Instant access savings account
customers might still be languishing on rates as low as one per cent, but relief has come in the form of a resurgence in the fixed rate savings accounts
While rates are still a long way off the dizzy heights of last summer, when returns of seven per cent or more were a common sight, Moneynet believes this is good news for savers and will offer more incentive for people to put money aside.
Meanwhile, the RPI (retail price index) remains negative, but this is of little relief to those with a mortgage and living on a fixed income, the financial comparison website says, and warns against the allure of committing to fixed rates with long terms because interest rates are likely to rise.
Commenting on the relationship between inflation and savings, Darren Cook, analyst at financial services information website Moneyfacts.co.uk, said: "Unfortunately low interest rates are geared to encourage savers to plough their savings back into the economy, but this serves little or no benefit to those who rely on interest from their hard earned wealth to subsidise their pension.
"Using both inflationary indices, the real return on savings interest is showing a pleasing upward trend for RPI, up 0.67 per cent on last month," he added.
According to moneynet.co.uk, at the top of its current best buy savings accounts are fixed rate bonds from ICICI Bank
Liberal Democrat Shadow Chancellor Vince Cable believes that while falling CPI might mean good news for savers, a return to inflation in the future should remain the long-term concern.
Commenting on the fall in inflation in April, Mr Cable said: "Although many are currently experiencing deflation in the short term, the longer term concern must still be a return to inflation.
"If inflation strikes back with a vengeance, the Bank of England will have to increase interest rates rapidly, badly hurting any economic recovery.Compare savings accounts »
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