Figures from the Office for National Statistics (ONS), show the Consumer Prices Index (CPI) was unchanged in March at 2.8%, but still remains at the highest level since May 2012.
At the same time, the Retail Prices Index (RPI), which was relegated from being an official statistic last month but is still used in the calculation of benefits and pensions, rose slightly from 3.2% in February, to 3.3% in March.
According to the ONS rises in the cost of books, electrical items and car insurance during March were offset by the falling cost of diesel and petrol.
Despite the inflation remaining steady in, it has now been above the Bank of England’s 2% target for the last 40 months in a row, indeed, it has only been at the target for six of the past 60 months. The Bank has also said it expects CPI inflation to rise above 3% later in the year, pushed higher by the rising cost of food and energy. Experts believe that fear of rising inflation could one of the reasons why the Bank’s Monetary Policy Committee (MPC) has so far resisted the temptation to extend the existing programme of Quantitative Easing (QE).
However, the pressure group, Save our Savers, has attacked the Banks’s record, pointing out that over the near 16 year life of the MPC, whose remit is to ensure price stability, RPI prices have risen a staggering 59%; to put it another way, every £100 pounds a saver had in May 1997 is now only worth £63.
Reacting to today’s inflation figures, Simon Rose, of Save our Savers, said: “Inflation of 3.3% may sound innocuous but, at this rate, the pound loses almost a third of its purchasing power every ten years. Imagine how this will affect everyone’s retirement. Inflation is not a force of nature. It is government-sanctioned theft which most affects the poor and the retired. The MPC must shape up and do its job. If people continually feel poorer, it is no wonder the economy is in such a desperate state.”
Best savings interest rates fail to beat inflation
Despite inflation being relatively low, it is hard for most savers to find a savings account which provides a return sufficient to beat inflation. There are a number of Cash ISAs, which offer an interest rate above the current level of inflation and it is possible for nil rate taxpayers to find a real return on their savings. However, there are currently no accounts which allow basic and higher rate taxpayers to get a rate of interest which will beat inflation.
Experts predict that as the full effects of the Funding for Lending Scheme, which has pushed down savings interest rates, take effect and inflation rises, it will be harder for even Cash ISA investors and non-taxpayers to fund a real return.
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