The savings squeeze continues as inflation hits five-year high
INTEREST-STARVED savers have been hit with more bad news after inflation hit a five-year high.
The Office for National Statistics reported consumer price inflation (CPI) was three per cent in September, up from 2.9 per cent in August and the highest rate since 2012.
The cost of living measure was driven up by rising prices for food and recreational goods and makes it more of a challenge for savers to find a decent return for their money.
Price comparison website Moneyfacts says there are now no standard savings accounts that beat or match inflation.
A poll of more than 1,500 adults by Rathbones shows 42 per cent of savers see rising inflation as one of the biggest threats to wealth, while 26 per cent reported having already been negatively affected by rising inflation.
“This period of rising inflation has left many facing a squeeze on their savings,” Robert Szechenyi, investment director at Rathbones, said.
“Those savers with their capital predominantly held in cash will have seen its value depleted as the rate of inflation moves upwards.
“It is unsurprising that almost half of the UK savers we surveyed cited inflation as being the biggest threat to their wealth. And with over a quarter of savers surveyed already reporting a negative effect from the rise, action needs to be taken by savers and investors to combat the effects of rising inflation.”
The latest CPI figures have also prompted speculation of a rise in the Bank of England base rate when the monetary policy committee (MPC) meets next month, as it stubbornly remains above the two per cent target.
“Consumer price inflation hitting its highest level for five years obviously boosts the case further for an interest rate rise,” Jacob Deppe, head of online trading platform, Infinox, said.
“The steady rise in CPI suggests it might finally be time for the Bank of England to get on with governor Mark Carney’s ‘slow and gradual approach’ to rate rises rather than wait any longer.
“But the MPC will be concerned about raising interest rates and killing an economy that is growing in an uncertain environment.
“Many in the City fear a rate hike in the current Brexit environment is unwise and will remove what meagre growth we have seen so far this year.
“But ultimately, it’s not the job of the Bank of England to manage economic growth and the Bank will come under increasing pressure to raise rates if inflation continues to edge up.”
Read more: Bank of England urged to delay rate rise