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Inflation rose to 9.4% in June 2022 – what does it mean for your savings?

Rising fuel and food prices are the biggest causes of June's CPI figure

Inflation increased to 9.4% in June 2022, the Office for National Statistics (ONS) has announced. It’s the third month in a row the figure has been above 9%, with prices rising at their fastest rate for 40 years.

The Consumer Prices Index (CPI) measure of inflation is up from 9.1% in May 2022,  and it hasn't been this high since 1982. It is the ninth month in a row inflation has risen. 

CPI tracks the cost of an imaginary ‘shopping basket’ of around 700 popular goods and services. In June, rising prices for motor fuels, food and non-alcoholic beverages were the main drivers behind the inflation figure.

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 again?

Fuel prices are the main cause of June's inflation rise. Average petrol prices stood at 184p per litre in June, the ONS said. This is the highest price since records began in 1990, and up from 129.7p in June 2021. The average price of diesel hit another record high at 192.4p per litre in June.

Food and non-alcoholic beverage prices also continue to soar and drive up inflation. Prices rose by 9.8% in the year to June 2022, up from 8.7% in May. The biggest price increases were for milk, eggs and cheese. 

Restaurant and accommodation prices have also increased, climbing by 8.6% in the year to June, according to the ONS.

The graph below shows how inflation has changed since June 2018.

The Bank of England’s target is 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, falling to a low of 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 typeAccountAERTerms
Five-year fixed-term savings accountPCF Bank 5 Year Term Deposit3.45%£1,000 minimum deposit
Five-year fixed-term cash IsaUBL UK 5 Year Fixed Rate Cash ISA2.6%£2,000 minimum deposit
Four-year fixed-term savings accountAldermore 4 Year Fixed Rate Account3.2%£1,000 minimum deposit
Four-year fixed-term cash IsaGatehouse Bank 4 Year Fixed Term Woodland Cash ISA2.45% (EPR*)£1,000 minimum deposit
Three-year fixed-term savings accountAldermore 3 Year Fixed Rate Account3.15%£1,000 minimum deposit
Three-year fixed-term cash IsaAldermore 3 Year Fixed Rate Cash ISA2.75%£1,000 minimum deposit
Two-year fixed-term savings accountGatehouse Bank 2 Year Fixed Term Woodland Saver3.1% (EPR*)
£1,000 minimum deposit

Source: Moneyfacts. Correct as of 19 July 2022, but rates are subject to change. *The accounts from Al Rayan Bank and Gatehouse Bank are Sharia-compliant, and so pay an expected profit rate (EPR) as opposed to an annual equivalent rate (AER). 

As you can see, none of the top-rate savings accounts are currently able to keep up with inflation. While it’s true that savings and cash Isa rates have been gradually rising, it’s been more than a year since any account has matched the inflation rate, according to analysis from Moneyfacts.

Savings rates are on the up

Around 1.3 million households across Britain had no savings before the cost of living crisis struck, according to research by the Resolution Foundation.

The findings matter because high inflation and surging energy costs continue to squeeze household budgets. For instance, the study showed more than a quarter of families with no savings would be unable to cope with an unexpected expense.

Some people’s finances are so squeezed it is simply not possible to put any money away, but others may decide not to open a savings account because the interest rates are unable to keep up with inflation and there’s little return on their investment.

But despite not being able to keep up with inflation, rates are improving. Moneyfacts data shows average instant-access savings account rates are almost back to pre-pandemic levels, paying an average of 0.59% in July, up from 0.46% in June. But, as the table shows, much higher interest rates are available.

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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 ham to hotel stays.  

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 June 2021 and bought them all again the same month in 2022, you could expect your shop this year would be 9.4% 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 ONS figures showing that fuel and food were the biggest contributors to inflation in June, we've rounded up some useful tips to help you keep costs as low as you can.

To combat rising fuel costs, our guide has tips on how to save fuel and other money-saving driving tips. And if you're buying a used car, we can also help you make sure you get the most for your money.

For helpful advice and tips on how to reduce the cost of groceries, check out our guide on how to save money on food bills, and discover which supermarket is cheaper with our Which? supermarket price comparison analysis. You can see all our top picks in our guide to the best food and drink, or check out our round-up of cheap supermarket dupes that beat your favourite food brands on taste.

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.