Inflation rose to 1% in July 2020, according to the latest figures from the Office for National Statistics (ONS) - partly due to prices rises for petrol and clothing.
July's inflation figures will also be used to determine next year's rail fare price rises. The Retail Prices Index (RPI) rose to 1.6%, up from 1.1% in June. This measure of inflation is used to calculate the cap on annual rail season ticket prices, so many commuters will have to pay more to get to work from January.
Here, Which? reveals why inflation has risen and where you can find the top-rate savings accounts and cash Isas.
The main factors behind July's inflation rise are price increases across petrol and diesel, where prices saw their largest monthly increase since January 2011.
Clothing and footwear prices - particularly women's garments - also contributed to the higher inflation figure, largely because prices fell more drastically between June and July 2019 than they did this year.
These downward contributions were partially offset by smaller price rises for private dental examinations and non-NHS physiotherapy as well as for alcoholic beverages and tobacco.
Similarly to previous months, the ONS notes that some products in the 'inflation basket' were unavailable; consumers were unable to buy 12 products in July, down from 67 unavailable items in June.
The graph below shows how the rate of CPI inflation has varied since January 2015, using figures from the ONS.
The Bank of England has been tasked with keeping inflation as close to 2% as possible. However, it's measured below that target since August 2019 and has stayed below 1% since April 2020 due to the effects of the .
The table below sets out the top rates for fixed-rate and instant-access cash Isas and savings accounts, in order of terms.
|Account type||Account||AER||Terms||Does this account beat or equal July inflation?|
|Five-year fixed-term savings account||Bank of London & The Middle East Five-Year Premier Deposit Account||1.5% (EPR*)||£1,000 minimum initial deposit||Yes|
|Five-year fixed-term cash Isa||United Bank UK Five- Year Fixed Rate Cash Isa||1.21%||£2,000 minimum initial deposit||Yes|
|Four-year fixed-term savings account||Bank of London & The Middle East Four-Year Premier Deposit Account||1.45% (EPR*)||£1,000 minimum initial deposit||Yes|
|Four-year fixed-term cash Isa||Punjab National Bank Four-Year Fixed Rate Cash Isa||1%||£1,000 minimum initial deposit||Yes|
|Three-year fixed-term savings account||Bank of London & The Middle East Three-Year Premier Deposit Account||1.4% (EPR*)||£1,000 minimum initial deposit||Yes|
|Three-year fixed-term cash Isa||United Bank UK Three-Year Fixed Rate Cash Isa||1.1%||£2,000 minimum initial deposit||Yes|
|Two-year fixed-term savings account||Bank of London & The Middle East Two-Year Premier Deposit Account||1.35% (EPR*)||£1,000 minimum initial deposit||Yes|
*Expected profit rate. Source: Moneyfacts. Rates correct as of 18 August 2020, but are subject to change.
This month, three of the top-rate accounts do not beat July's rate of CPI inflation, but all the others do. However, many savers won't be able to afford them.
Only three of the 12 accounts here will accept an initial minimum deposit of less than £1,000; four of them require significantly more than that.
The good news is that the instant-access accounts from NS&I are both good for savers and offer rates that beat some fixed-term accounts. In fact, NS&I Income Bonds pay a higher rate than the top one-, two-, three- and four-year fixed-rate cash Isas.
Average savings rates have been falling dramatically since the UK's COVID-19 lockdown began in March, some providers are starting to increase their rates.
According to data from Moneyfacts, the last month has seen 10 providers increase their savings rates, including OakNorth Bank, Charter Savings Bank and United Trust Bank, which are featured on our table.
However, there has been speculation that this slight lift will only be short-lived, as it could be a way for smaller brands to fund future borrowing during the uncertainty of the , with the potential for more job losses when the ends in October.
CPI inflation tracks the cost of a 'basket' containing around 700 popular goods and services - from train fares to toys and games.
The figure that's released each month shows how much prices have changed in comparison with the same month the year before. So, if you'd bought all of the items in the basket in July 2019, and bought them all again in July 2020, your second shopping trip would have been 1% more expensive.
Over time, these price changes can affect the buying power of money held in savings accounts. If the cash isn't growing in interest at the same rate as inflation or more, it will effectively lose value, as you'll be able to buy less with it.
That's why it's important to make sure your money is making as competitive a return as possible - even when rates are falling.
You can search through hundreds of Isas and savings accounts with Which? Money Compare.
The comparison site details the interest rate and terms of an account, as well as how it rated in our unique savings survey. It also lists the accounts that have been named a Which? Recommended Provider.
Which? Recommended Providers are companies that have both been rated highly by customers and offer products that meet the exacting standards of our expert researchers.
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