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18 May 2022

Inflation rises to 9% in April 2022: what does it mean for your savings?

The April CPI figure was driven up by record fuel prices

Inflation reached a 40-year high of 9% in April 2022, the Office for National Statistics (ONS) has announced, with record fuel costs a key driver of the rise. 

The Consumer Prices Index (CPI) measure of inflation increased from 7% in March 2022. CPI tracks the cost of an imaginary ‘shopping basket’ of around 700 popular goods and services. 

Here, Which? explains why the inflation rate has risen and how it compares to the top-rate savings accounts and cash Isas. We’ll also share tips for tackling the rising cost of living.

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Why has inflation risen?

The April inflation rate was mainly caused by transport costs - specifically the growing price of fuel and second-hand cars. 

Petrol prices reached an average of 161.8 pence per litre in April, which is the highest price on record. Diesel prices also reached a record high, at 176.1 pence per litre on average.

Second-hand car prices have been driven up by the global semiconductor shortage, which has stalled new car production. More people have turned to the second-hand market as a result. 

Rising restaurant and hotel prices also contributed to CPI's growth last month, as did the cost of games, toys and hobbies. Videogames in particular were a factor here. 

The graph below reveals the way inflation has changed since April 2018.

It’s the Bank of England’s target to keep inflation as close to 2% as it can. But it hasn’t been that low since July 2021. 

Before that, inflation was very low. It was below 2% from August 2019 to April 2021, bottoming out at 0.2% in August 2020 due to the pandemic’s impact.

Can any savings rates beat CPI inflation?

This table shows the top rates for fixed-term and instant-access cash Isas and savings accounts, ordered by term.

Account typeAccountAERTermsDoes this account equal or beat April inflation?
Five-year fixed-term savings accountAllica Bank Fixed-Term Personal Savings Account2.8%£10,000 minimum depositNo
Five-year fixed-term cash IsaUBL UK 5 Year Fixed Rate Cash Isa2.2%£2,000 minimum depositNo
Four-year fixed-term savings accountUnited Trust Bank UTB 4 Year Bond2.7%£5,000 minimum depositNo
Four-year fixed-term cash IsaUBL UK 4 Year Fixed Rate Cash Isa2.1%£2,000 minimum depositNo
Three-year fixed-term savings accountAl Rayan Bank 36 Month Fixed Term Deposit2.8% EPR*£5,000 minimum depositNo
Three-year fixed-term cash IsaHampshire Trust Bank 3 Year ISA Bond2.16%£1 minimum depositNo
Two-year fixed-term savings accountAl Rayan Bank 24 Month Fixed Term Deposit2.7% EPR*£5,000 minimum depositNo

*The accounts from Al Rayan Bank are Sharia-compliant, and so offer an expected profit rate (EPR) as opposed to interest (AER).

Source: Moneyfacts. Correct as of 17 May 2022 but rates are subject to change.

As you can see, none of the top-rate savings accounts can match or beat inflation at the moment. Although savings and cash Isa rates have been gradually rising, it’s been over a year since any account has matched the inflation rate according to analysis from Moneyfacts.

The graph below shows the difference between CPI inflation and the top-rate five-year fixed-term savings account at the time the inflation data was released.

Source: Moneyfacts and ONS

How does CPI inflation affect your savings?

CPI inflation is the speed at which the prices of the goods and services bought by households rise or fall. It tracks the costs of a shopping basket of around 700 popular goods and services bought by households - from tuna to train tickets. 

The figure - which is provided by the ONS each month - shows how much prices have changed compared with the same month of the previous year. 

For example, if you'd bought all the same items in the basket in April 2021 and bought them all again the same month in 2022, you could expect your shop this year would be 9% more expensive. 

When you keep money in your bank, you'll likely be earning interest, which should balance out the effects of inflation. 

If your cash isn't growing in interest at the same rate of inflation or more, it will effectively lose value because you'll be able to buy less with it. That's why you should ensure that your money is making the best return possible - even when savings rates are low.

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What can you do to tackle rising prices?

Since the ONS says fuel and car-related costs were the key drivers of inflation last month, we've rounded up some useful tips to help you keep costs as low as you can.  

Find out how to save fuel and other money-saving driving tips here. And take a look at our guide to buying a used car to make sure you get the most for your money if you are in the market.  

You can also read our 17 ways to save money on your household bills and living costs for advice on everything from cutting broadband bills to saving on fuel.

Get further help with the cost of living

Experts from across Which? have compiled the latest news and advice that can help you navigate the cost of living crisis. Check out our free advice and podcasts to help ease the squeeze on household bills, grocery shopping and more.