World Economy

Inflation Takes Toll on UK Savers

Inflation Takes Toll on UK SaversInflation Takes Toll on UK Savers

Official figures from the Office for National Statistics have revealed that UK inflation returned to positive territory in November, with the measure of CPI standing at 0.1%.

For economists, this is a welcome turnaround from the rate of -0.1% recorded in both September and October, but it won’t be such good news for savers–especially as the figures reveal that they’re already contending with multiple rate cuts, MoneyFacts reported.

The figures show that rate reductions in the savings market are now outweighing rate rises for the first time since daily rate change monitoring began, which means it may not be such a Merry Christmas for many savers: during November, Moneyfacts recorded 36 savings rate rises, with only one deal posting a significant increase of 0.80%.

Disappointingly, these rises were eclipsed by the 73 rate reductions that took place over the same period, with some rates falling by a massive 0.86%.

Transport costs, beverages and tobacco prices were the main contributors to the rise in the rate, said the ONS. However, this was partially offset by a fall in clothing prices, it added.

Last week, UK interest rates were left unchanged again at 0.5% by the Bank of England’s rate-setters. The nine policymakers on the Monetary Policy Committee voted 8-1 for no change, with the bank predicting that inflation will stay below 1% until the second half of next year, BBC reported.

Inflation as measured by the Retail Prices Index was 1.1%, up from 0.7% in October. RPI includes housing costs such as mortgage interest payments and council tax, whereas CPI does not.

“UK inflation remained largely absent in November, and looks set to remain weaker for longer than forecasters have recently been expecting,” said Chris Williamson, chief economist at data firm Markit.

“Falling prices for oil and other commodities are helping drive down companies’ costs.

“Weak wage pressures and fierce competition in the retail sector are also helping keep a lid on prices. Hence clothing prices showing a record fall between October and November.”

Ben Brettell, senior economist at broker Hargreaves Lansdown, said that while core inflation–which strips out volatile components such as food and energy–had risen slightly, it “remained weak at 1.2%”.

“This offers little suggestion that underlying inflationary pressures are building in the UK economy. Furthermore there are signs that wage growth is flattening out – figures due out tomorrow are expected to show pay growth has slowed from 3.0% to 2.5%.”