US Edition
Savers can now beat inflation for the first time in two years as inflation dropped below the interest rates paid on the best accounts.
The Consumer Price Index (CPI), which measures the rate at which prices increase, fell from 6.7pc in September to 4.6pc, down from a peak of 11.1pc last October, meaning Rishi Sunak has achieved his target of halving inflation by the end of the year.
While top savings rates have fallen below 6pc this month, there are now more than 900 savings accounts paying more than the rate of inflation.
The best easy-access account, at 5.2pc with Ulster Bank, comfortably beats the inflation rate, as do the top one-year and two-year fixes, with Metro Bank at 5.91pc and JN Bank with 5.8pc.
While rates on Isas lag behind traditional savings accounts, there are now 46 variable rate Isas and 215 fixed-rate Isas that will pay a real return on savers’ money.
The last time the rate of inflation was lower than the top savings rates was in May 2021.
The Bank of England is targeting a fall in inflation to 3.1pc by the end of 2024. Typically, central banks globally target an inflation rate of 2pc.
The inflation decrease follows the Bank of England’s decision not to increase or decrease the Bank Rate for the second time consecutively, holding it at 5.25pc.
This paused the tightening spiral, which had seen the central bank raise the rate 14 times in a row, starting in December 2021.
Prime Minister Rishi Sunak made halving inflation one of his five key pledges in January this year, alongside reducing the national debt and growing the economy.
Rachel Springall, of analysts Moneyfacts, said: “It has taken over two years, but finally inflation has fallen to a level where there are now some standard savings accounts that can outpace its eroding prowess.”
She added: “Savers will no longer find a bond that pays more than 6pc, but it is worth noting that challenger banks are still holding the top spots despite shuffling positions.”
Sarah Coles, of broker Hargreaves Lansdown, said: “Finally inflation has dropped below the rates available from the most competitive savings accounts. Psychologically this always helps encourage us to squirrel our money away, with fewer concerns that our spending power will be devoured by inflation.
“However, it’s always important to bear in mind that inflation looks backwards, at the past 12 months, while savings rates look forward, so as inflation drops, it reveals that the most competitive savings rates have actually been beating inflation for a while.”