The latest rise in inflation means that ever more savers will be struggling to retrieve a return on their money.
The hike to 4.5 per cent in the rate of inflation as measured by the Consumer Prices Index has yet further eroded the value of many accounts.
Higher rate taxpayers now require an account that pays out interest of 7.5 per cent in order to secure some sort of return on their funds. For basic rate taxpayers that figure is 5.6 per cent.
Such is the measure of inflation that most savers are now losing out once the tax on their money is factored in.
Sylvia Waycot, of the financial website Moneyfacts, said: “After one month’s reprieve inflation is back on the rise, scuppering hopes of getting any meaningful return on family savings for another month.
“CPI is more than double the Government’s 2 per cent target. Every time it rises, spending power decreases and any hard earned nest egg or savings safety net is further eroded.”
Andrew Hagger, of Moneynet, added: “The gloom for savers shows no sign of clearing and it’s likely to be sometime before the inflation returns to anywhere near the now meaningless 2 per cent government target.”
It is expected that inflation will hit 5 per cent later this year.
However, there might be a light at the end of the tunnel. Analysts predict that the cost of living will dip significantly in 2012. One reason for this is because there is little evidence that the current spiral in prices has provoked a corresponding rise in wage demands, which remain subdued.
Business groups – the British Chambers of Commerce and the Institute of Directors – have urged the Bank of England to keep official interest rates as low as possible in order to prevent a sharp swing from inflation to deflation in 2013, so threatening the economic recovery.
