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Inflation plunges to 2.3% – almost all savings deals can now beat it
Falling gas and electricity prices helped push the CPI figure to its lowest level in nearly three years
Inflation as measured by the consumer prices index (CPI) plummeted almost one percentage point to 2.3% in April 2024, according to data from the Office for National Statistics (ONS).
This month's fall puts the CPI figure within a hair's breadth of the Bank of England's target of 2%. But it's important to remember that the decrease doesn't mean prices are falling; it just means they're rising at a slower rate than before.
Here, Which? explains why the inflation rate has eased, and which savings accounts and cash Isas can now help you beat it. We also share our advice for keeping costs down.
Why has inflation fallen?
The annual rate of inflation has dropped to its lowest level since September 2021, when it was 2.9%.
The monthly fall – the third in a row – was driven largely by the falling price of energy. ONS figures show that the combined cost of electricity, gas and other fuels fell by 27.1% in the year to April 2024, the largest fall on record. The new energy price cap, which fell 12.3% to £1,690 from 1 April 2024, is a key reason for fuel costs cooling.
Costs also dropped sharply for a number of other goods and services. The rate at which food and non-alcoholic drinks prices are rising eased to 2.9% last month, down from an increase of 4% in the year to March 2024. The annual rate has fallen dramatically since March 2023, when it hit a 45-year high of 19.2%.
ONS data shows there were also significant falls in the price of alcohol and tobacco, recreation and culture, and communication. The cost of eating out at a restaurant and staying at a hotel fell slightly too.
While the latest figures paint a promising picture overall, the cost of fuel went up. Petrol prices rose by 3.3p per litre and diesel by 3p per litre in the 12 months to April 2024. Air fares – mainly for European routes – also increased.
The graph shows how inflation has changed since August 2020:
The Bank of England’s target is to keep inflation as close to 2% as it can, and the latest CPI figure is tantalisingly close to that goal. Inflation hasn’t been that low since July 2021 and before that it was even lower – hitting a rock-bottom figure of 0.2% in August 2020 due to the impact of the pandemic.
How many savings deals beat CPI inflation?
This month's drop in the CPI figure is good news for savers, with the latest Moneyfacts data showing nine in 10 products now offer inflation-busting deals.
This table shows the top rates for fixed-term and instant-access cash Isas and savings accounts, ordered by term.
| Account type | Account | AER/EPR | Terms |
|---|---|---|---|
| Five-year fixed-term savings account | Shawbrook Bank 5-Year Fixed Rate Bond | 4.57% | £1,000 minimum deposit |
| Five-year fixed-term cash Isa | State Bank of India 5-Year Cash ISA Fixed Deposit | 4.15% | £5,000 minimum deposit |
| Four-year fixed-term savings account | Isbank 4-Year Fixed Term Deposit (Raisin exclusive*) | 4.5% | £1,000 minimum deposit |
| Four-year fixed-term cash Isa | UBL UK 4-Year Fixed Rate Cash ISA | 4.05% | £2,000 minimum deposit |
| Three-year fixed-term savings account | Shawbrook Bank 3-Year Fixed Rate Bond | 4.71% | £1,000 minimum deposit |
| Three-year fixed-term cash Isa | Shawbrook Bank 3-Year Fixed Rate Cash ISA | 4.41% | £1,000 minimum deposit |
| Two-year fixed-term savings account | DF Capital 2-Year Fixed Rate Deposit | 5.07% | £1,000 minimum deposit |
Source: Moneyfacts. Correct as of 22 May 2024 but rates are subject to change. *Deals marked (Raisin exclusive) are exclusively available through Raisin UK, which is a savings platform. Raisin offers savings accounts from a range of smaller or lesser-known banks and building societies. You'll deposit your money and manage your account through Raisin, rather than dealing directly with the provider. Deposits with all providers are protected by the Financial Services Compensation Scheme (FSCS), with the exception of deposits with AgriBank and HoistSavings, which are protected by the Maltese and Swedish deposit protection schemes, respectively. You can find out more about Raisin in our guide to savings platforms.
Keeping an eye on price rises is important for growing your nest egg because if interest isn't at the same rate of inflation or more, your cash will effectively lose value over time.
Moneyfacts data shows 1,558 savings accounts offer rates that beat inflation, including easy-access, notice accounts, variable-rate, fixed-rate bonds and Isas. That's up from 1,364 last month.
The sheer number of accounts that offer inflation-busting rates is great news for savers, who wouldn't have found a single deal that could beat the CPI figure of 8.7% this time last year.
Challenger banks continue to offer the most competitive rates, and shorter-term fixed products offer the highest-interest deals.
With the Bank of England signalling that a cut to its base rate could happen as soon as this summer, savers might want to grab the best deal now before providers adjust interest in response to any fall. That's particularly true of anyone looking for an account with a variable rate that providers can reduce whenever they want.
How to cut costs when prices are still high
While the price of filling up your car at the pump has dropped dramatically over the past couple of years, April saw the cost of petrol and diesel rise again. Our guide on how to save fuel and other money-saving driving tips can help you keep costs down – from tips on how often you need to fill up to where to go when you do.
And remember, while inflation on food may be easing, it doesn't mean that prices are falling, just that they're rising more slowly than before.
We have lots of advice to help you cut costs on your grocery shopping, plus our monthly analysis reveals which is the cheapest supermarket for big and small trolleys of groceries.
