The rate price change has been pushed up by energy bill hikes
Here, we explain everything you need to know about the latest inflation stats and which savings accounts offer inflation-beating rates.
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What is the current rate of inflation in the UK?
The current CPI rate of inflation in the UK is 2.3% for October 2024, according to the latest figures from the Office for National Statistics (ONS). That’a a little more than the expected 2.2%. It was 1.7% in August – a three and a half year low.
The current rate of core inflation (which removes more volatile products like food and fuel) in the UK is 3.3%, up from 3.2% in September. Services inflation (which has remained higher than the rest for a while now) rose from 4.9% to 5%.
Meanwhile, RPI (still used in some cases such as rail fares, interest on student loans and air passenger duty) in the UK is up to 3.4%. It was 2.7% last month.
Historic inflation rates
The graph below shows how CPI inflation has changed in the UK.
source: tradingeconomics.com
What is inflation?
The main thing to remember is even if the rate of inflation is falling, prices are still going up. They’re just increasing by a slower rate.
Check out our What are inflation and deflation? article to learn more about what price changes count towards inflation, as well as explanations of the different measures including CPI and RPI.
When is the next inflation announcement?
The next inflation announcement will be on 18 December 2024.
The ONS publishes inflation figures each month and has confirmed the following dates for upcoming announcements :
- 18 December 2024
- 15 January 2025
- 19 February 2025
- 26 March 2025
- 16 April 2025
- 21 May 2025
- 18 June 2025
What’s changed this month?
The change to the energy price cap in October is the big reason for the increase this month – though that was expected. However there were increases elsewhere too, with air fares in particular on the up. However, falls in petrol, recreation, culture and communication costs helped to balance those out.
You can see how prices have changed for individual items in this ONS calculator, while this chart shows the annual CPI rates over 12 months for the last three months.
| Sep 2024 | Oct 2024 | |
|---|---|---|
| CPI All items | 1.7 | 2.3 |
| Food and non-alcoholic beverages | 1.9 | 1.9 |
| Alcohol and tobacco | 4.9 | 5.3 |
| Clothing and footwear | 0.8 | 1.0 |
| Housing and household services | -1.7 | 2.9 |
| Furniture and household goods | -1.0 | -0.5 |
| Health | 5.2 | 5.6 |
| Transport | -2.2 | -1.9 |
| Communication | 5.2 | 4.6 |
| Recreation and culture | 3.8 | 3.0 |
| Education | 4.4 | 5.0 |
| Restaurants and hotels | 4.1 | 4.3 |
| Miscellaneous goods and services | 3.3 | 2.9 |
| All goods | -1.4 | -0.3 |
| All services | 4.9 | 5.0 |
| CPI exc food, energy, alcohol and tobacco (core CPI) | 3.2 | 3.3 |
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Will inflation go up or down?
The Bank of England still think the rate is moving towards its 2% target, but the measures announced in the Budget look set to slow that down.
So though we’ve seen a reversal in direction (up rather than down) this month, it doesn’t mean it’ll keep increasing to those scary double digit rates of two years ago. What’s more likely is for the rate to stay around this, up or down a little, each month.
What does it mean for the base rate of interest?
In October, the Bank of England cut the base rate to 4.75% (having previously been cut in August), a sign that by going below 2%, things were on the mend.
However, the latest rate means it’s increasingly unlikely that there’ll be another cut in December – even though a month ago it looked like it was going to happen. And predictions of further cuts have been scaled back, and we’re likely to see fewer in 2025 – perhaps just three.
What does it mean for future price increases
October’s inflation rates aren’t linked to any key increases. Here are the main price hikes linked to inflation rates:
- July RPI – rail fares in March
- September CPI – benefits including State Pension in April
- December CPI – student loans in September
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What does it mean for savings?
If inflation remains ‘sticky’ and does slow down the base rate cuts, then it’ll mean we see less movement in savings rates.
Do any savings accounts beat inflation?
Despite falling savings rates, we’re still at a place where there are lots of options that beat inflation!
The top-paying savings account is the Principality Building Society Regular Saver which offers 8%, though only for six months. It’s worth noting that this is a “regular savings account”.
This means that you’ll have to meet certain requirements to keep the account open and get the full amount of interest. For example, depositing up to a certain amount each month or limits on how much you can withdraw. (Some don’t permit withdrawals at all.)
You can also earn 6% with the Santander Edge Saver, if you hold a Santander Edge account. If you add direct debits (to earn cashback) on the linked current account there’s a monthly fee for the current account, so keep that in mind when comparing savings rates.
However if you’re looking for accounts without these balance restriction, there are now dozens of easy access and fixed rate savings accounts above the inflation rate.
The best easy access is an ISA from Trading 212 paying 5.17%. This allow more flexibility and you can deposit and withdraw your money more freely. And there are notice accounts going as high as 5.15%, though you have to give notice before you can access your cash – so they’re not as flexible.
Hi Andy, great summary, very professional. I’m still learning about all of these subjects, so thanks for that!
Do you know what to expect regarding the interest rate of the savings accounts? Are the banks planning to reduce the interest rate soon based on the reduction in the UK inflation?
Government controlled ONS will produce low incorrect data for September in order to determine next years pension & benefit increases then “amend” the data by December so the government can claim that it is too late to correct next years increases.