CREDIT CARDS

Cost of Living Rises as Inflation Hits 4.5%

Inflation has risen from 4 percent to 4.5 percent, the Office for National Statistics revealed, placing more pressure on the nation’s finances as the cost of everyday items continues to rise.

This figure is significantly higher than expectations too of 4.1 percent, and is thought to be contributed mainly by the big rise in transport costs.

The cost of air travel rose by 29 percent in April, sea fare by 22.3 percent, and the rise in tobacco and alcohol is also a significant pressure on inflation along with the high price of energy.

The retail prices index (RPI) annual inflation stands at 5.2 percent in April, down from 5.3 percent in March.

The Bank of England is now under greater pressure to raise the base rate from 0.5 percent to ease the strain of inflation on the nation’s finances.

However, F&C Investments points out that inflation is out of the Bank’s control and will not have the desired effect in bringing inflation down in the short term.

“The recent increase in indirect taxes, the rise in energy prices and other commodities and the weakness of sterling resulting in higher import costs have all contributed to inflation being much higher than the MPC’s target of 2 percent,” said Tess Scott, Global Strategy director.

According to Defaqto, 1.1 percent of the 1,869 savings accounts on the market provide a real rate of return to the basic rate taxpayer.

To beat inflation, 50 percent of taxpayers have a choice of only 11 Cash ISAs, and there are only 6 accounts available that give a basic rate taxpayer a real return based on RPI.

For non-taxpayers, there are only 12 accounts available that give them a real return based on RPI, and 46 accounts available if based on CPI.

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