Inflation falls again to 3.4%

20 March 2012

The rate of inflation fell to 3.4% in February, the lowest it has been since November 2010, according to the Office for National Statistics.

The consumer prices index (CPI) measure of inflation in the UK dropped to 3.4%, from 3.6% in January, while the retail prices index (RPI), which includes mortgage interest payments, also fell to 3.7% from 3.9%.

The main reason for the falling rate is because of discounts offered by retailers within the domestic electricity and gas, recreation and culture, and transport sectors.

But higher costs of alcohol and vegetables stopped the rate declining faster.


This is the fifth month in a row that inflation has fallen and the news will be welcomed by savers as there is now a choice of 79 accounts on the market that will negate the effects of tax and inflation.

To beat inflation, a basic-rate taxpayer at 20% now needs to find a savings account paying 4.25% per annum, while a higher-rate taxpayer at 40% needs to find an account paying at least 5.66%.

"Logic says that the rise must be easing some of the misery savers have suffered due to a combination of high inflation and the low savings interest rates over the past three years," says Sylvia Waycot, spokesperson for Moneyfacts.

"Today's rate of inflation means hundreds of thousands of savers need an account paying a hefty 4.25% before they earn a real rate of return on their savings and yet the average no-notice savings account only pays a paltry 0.98%, which shows the size of the problem," she adds.

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