Inflation falls to two percent but savers ‘shouldn’t get too comfortable’ – full details

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Inflation figures were released today as the Consumer Prices Index (CPI) fell from 2.5 percent in June to two percent in July. This is the first time the rate fell to the BoE’s two percent target in two months.

Specifically, the dip in inflation was driven by price falls in clothing and footwear.

This “largely offset” price rises seen in transport, according to the Office for National Statistics (ONS).

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Commenting on the matter, Neil Messenger, Director for Client and Markets at 1825, said: “July’s inflation dip is likely to be transitory – so savers shouldn’t get too comfortable.”

“Businesses continue to grapple with inflationary pressures as the economy re-opens and the Bank of England now forecasts the headline measure to hit four percent by the end of the year, doubling the Government’s two percent target.

READ MORE: Bank announces ‘noteworthy’ increase on interest rates

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“Since the Global Financial Crisis, savers have been swimming upstream and the current has been even stronger in recent months.

“The Bank of England appears confident inflation will start to cool down of its own accord. The cooldown may have started sooner than expected.

“For savers, the Global Financial Crisis, Brexit and the Covid-19 pandemic have been the savings equivalent of an extinction event.

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“To keep returns real right now there are few options other than to move up the risk curve.

Despite this Rachel Springall, a Finance Expert at Moneyfacts, warned savers will need to act fast if they want to take advantage of this.

She said: “The savings market continues to move in a positive direction as rates across most of the savings spectrum improve at a slow and steady pace.

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“Savers who may be coming off a one-year fixed bond and wish to lock into a new deal will find notable improvements to the top rate tables over the past few months, and whilst the average return is 0.03 percent less than a year ago – it is still moving in the right direction and further away from the record low recorded in April this year.

“Longer-term fixed bonds also improved this month, but it is unclear whether savers are yet prepared to tie up their money for longer than a year when chasing the top returns.

“Choice has expanded in the market for a fourth consecutive month which is encouraging for savers and a catalyst for providers to keep on top of the competition and perhaps enhance their deals in response. “We now have the most savings providers on record, and more brands can mean more competition.

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“After the market endured turmoil due to the pandemic and subsequent base rate cuts, there is more room for improvement, but it is still good to see rates rise instead of fall as only a few months ago average rates throughout sat at record lows.”

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