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Inflation rises to 6.2% in February 2022: what does it mean for your money?
Inflation rose to 6.2% in February 2022, according to the latest figures from the Office for National Statistics (ONS) - partly due to price rises for motor fuels, second-hand cars, and clothing and footwear.
The Consumer Prices Index (CPI) measure of inflation is up from 5.5% in January 2022..
CPI inflation tracks the cost of a 'shopping basket' that contains around 700 popular goods and services.
Here, Which? reveals why the inflation rate has changed, how it compares with the top-rate savings accounts and cash Isas - along with suggesting ways you can tackle the rising costs of living.
Why has inflation risen?
February's inflation rate was mainly caused by prices rises for motor fuels - average petrol prices stood at 147.6p per litre in February 2022, compared to 120.2p per litre in February 2021.
Second-hand car prices are also on the rise, likely due to continued high demand since the start of the coronavirus pandemic.
Elsewhere, clothing and footwear prices rose by 8.8% in the year to February 2022, while prices for food and non-alcoholic beverages rose by 5.1%.
The graph below shows how inflation has fared since February 2018, using data from the ONS.
The Bank of England has been tasked with keeping inflation as close to 2% as possible. CPI inflation measured below this figure between August 2019 and April 2021, reaching as low as 0.2% in August 2020 due to the effects of the coronavirus pandemic. However, it's been significantly above 2% since August 2021, and it's estimated that inflation will remain high for some time to come.
The base rate, which affects the costs of mortgages and the amount of interest paid on savings, has now risen three times since December in response to soaring inflation - and could be tweaked again if the Bank of England thinks it could help keep inflation down. The next decision on the base rate will be published on 5 May.
Can any savings rates beat CPI inflation?
The table below sets out the top rates for fixed-term and restriction-free instant-access cash Isas and savings accounts, by order of term.
| Account type | Account | AER | Terms | Does this account equal or beat February inflation? |
| Five-year fixed-term savings account | PCF Bank Five-Year Term Deposit | 2.3% | £1,000 minimum initial deposit | No |
| Five-year fixed-term cash Isa | Close Brother Savings Five-Year Fixed-Rate Cash Isa | 1.9% | £10,000 minimum initial deposit | No |
| Four-year fixed-term savings account | PCF Bank Four-Year Term Deposit | 2.15% | £1,000 minimum initial deposit | No |
| Four-year fixed-term cash Isa | UBL UK Four-Year Fixed-Rate Cash Isa | 1.7% | £2,000 minimum initial deposit | No |
| Three-year fixed-term savings account | Al Rayan Bank 36 Month Fixed Term Deposit | 2.11% | £5,000 minimum initial deposit | No |
| Three-year fixed-term cash Isa | UBL UK Three-Year Fixed-Rate Cash Isa | 1.7% | £2,000 minimum initial deposit | No |
| Two-year fixed-term savings account | Al Rayan Bank 24 Month Fixed Term Deposit | 1.96% (EPR*) | £5,000 minimum initial deposit | No |
Source: Moneyfacts. Correct as of 22 March 2022, but rates are subject to change. *The accounts from Al Rayan Bank are Sharia-compliant, and so offer an expected profit rate (EPR) as opposed to interest (AER).
As the table shows, no savings accounts or cash Isas come anywhere close to beating February's CPI rate of inflation.
For those who want to secure the top rates, you'll need to have a significant savings sum ready to lock away as the minimum deposit required to open most of these accounts is creeping up.
Where we'd once seen £1,000 commonly accepted by most top-rate accounts, providers are now asking for much larger deposits.
There are still options if you have less than £1,000, of course - some of these accounts can be opened with just £1 - but they can come with other terms to be aware of.
For instance, while Cynergy Bank's instant-access account pays the top rate now, it will fall to just 0.3% after the first 12 months. When this happens, you should look to switch to a new account with a more competitive rate.
- Find out more:how to find the best savings account
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 hairspray to hot cross buns.
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 February 2021 and bought them all again the same month in 2022, you could expect your shop this year would be 6.2% 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.
What can you do to tackle rising prices?
With the biggest price rises driving up inflation being transport, clothes and shoes, and food, we have lots of tips to help you cut costs in these areas.
Our experts have come up with 15 ways to save on fuel and other money-saving driving tips, which reveals where to find the cheapest petrol and how to cut down on how much you use. And, for other modes of transport, our article on 11 ways to save on transport costs can also help.
We've looked into which groceries have inflation-busting price rises, as well as how to spend less at the supermarket.
If you want to cut costs when refreshing your wardrobe, we can also offer 15 ways to save money on clothes and shoes.
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.
