BANK ACCOUNTS

Inflation drops to 4.2% with CPI at highest level for two years

The Bank of England has announced that the rate of inflation has dropped to 4.2%, down from 4.8% in November last year.

The drop in the Consumer Price Index, one of the measures for the country’s inflation, is the largest in two years.

The Retail Price Index, the other measure used to determine inflation, has remained the same at 4.8%.

The last time there was a larger fall in inflation was in 2008 when VAT was reduced, leading to a drop in inflation from 4.1% to 3.1%.

The drop in inflation has been welcomed by consumers and industry expert alike, as it will reduce the squeeze on people’s bank accounts.

“The rising cost of living has had a major impact on UK household budgets for the last 12 months and signs that this is beginning to reduce is very welcome indeed,” said Kevin Mountford, head of banking at MoneySupermarket.com.

“However, despite inflation falling month on month, prices are still high. People still need to make sure they're not paying over the odds for major expenses like car and home insurance, energy and other household bills.”

The fall in CPI inflation has been attributed to a number of downward pressures. These include a fall in the price of petrol and gas, as well as clothing.

The only upward pressure on the change in CPI inflation came from an increase in landline and mobile phone charges.

“High inflation combined with low interest rates has had a major impact on UK savers who have struggled to gain any real returns on their savings pots - a particular problem for those consumers who rely on their savings for income,” added Mr Mountford.

“Although the majority of savings accounts do not pay a rate to beat inflation, making sure your savings are working as hard as possible for you is vitally important.”

Tags: BANK ACCOUNTS, Bank of England, consumer price inflation CPI, cost of living, rate of inflation