UK inflation has fallen to 3.4% in February 2024
UK inflation has is down to the lowest rate in two and a half years.
Here, we explain everything you need to know about the latest inflation stats and which savings accounts offer inflation-beating rates.
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What is the current rate of inflation in the UK?
The current CPI rate of inflation in the UK is 3.4% for February 2024, according to the latest figures from the Office for National Statistics (ONS).
This was a slightly lower than the most recent predictions, which suggested a drop from 4% to 3.5%.
The current rate of core inflation in the UK is 4.5%, down from 5.1% last month. Meanwhile, RPI in the UK is 4.5%, down from 4.9% in January.
Historic inflation rates
The graph below shows how CPI inflation has changed in the UK.
source: tradingeconomics.com
What is inflation?
The main thing to remember is even if the rate of inflation is falling, prices are still going up. They’re just increasing by a slower rate.
Check out our What are inflation and deflation? article to learn more about what price changes count towards inflation, as well as explanations of the different measures including CPI and RPI.
When is the next inflation announcement?
The next inflation announcement will be on 17 April 2024.
The ONS publishes inflation figures each month and has confirmed the following dates for upcoming announcements :
- 22 May 2024
- 19 June 2024
- 17 July 2024
- 14 August 2024
- 18 September 2024
- 16 October 2024
- 20 November 2024
- 18 December 2024
What’s changed this month?
There was a change in some of the goods and services used to measure inflation (items such as air fryers and vinyl records are now in, while hand gel and rotisserie chicken are among the items removed). However, since these are weighted, that won’t have impacted the rate itself.
The main drivers of inflation this month were a higher increase in the cost of motor fuels and home rentals, though that was more than offset by some lower increases to some foods, eating out and communication services. Combined the average rate was lower.
You can see how prices have changed for individual items in this ONS calculator.
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Will inflation go up or down?
Though it’s well down from the peak of 11.1% in October 2022, the latest rate is still higher than the Bank of England target of 2%.
With the Bank meeting tomorrow for the latest base rate announcement, we may find out if they still expect inflation to drop quickly to that 2% level by June (if not sooner), before going up again to around 2.9% by the end of the year.
What does it mean for the base rate of interest?
Expectations are that inflation will keep on falling, meaning we will see cuts to the base rate. The latest thinking is there will be three or four cuts this year, starting in the summer.
We won’t know for sure for a while as it’s still likely we won’t see any change at the next meeting on 21 March 2024. We’ll share what happens in our Base Rate update article.
Do any savings accounts beat inflation?
Finally we’re at a place where there are lots of options that beat inflation!
The top-paying savings account is the First Direct Regular Saver which offers 7% and you’ll need to have a bank account with them to access this rate.
It’s worth noting that this is a “regular savings account”. This means that you’ll have to meet certain requirements to keep the account open and get the full amount of interest.
For example, depositing up to a certain amount each month or limits on how much you can withdraw. (Some don’t permit withdrawals at all.)
You can also earn the same 7% with the Santander Edge Saver, if you hold a Santander Edge account. But you’ll have to pay a monthly fee for the current account, so keep that in mind when comparing savings rates.
However if you’re looking for accounts without these balance restriction, there are now dozens of easy access and fixed rate savings accounts above the inflation rate.
The best easy access is at 5.2%. These allow more flexibility and you can deposit and withdraw your money more freely. And there are fixes going as high as 5.27%, though you’re locking your money away.
