You are here: Home - Household Bills - News -

Inflation up as food and transport costs rise

0
Written by: Emma Lunn
14/07/2021
The consumer prices index (CPI) measure of inflation rose by 2.5% in the 12 months to June 2021, up from 2.1% in the 12 months to May.

On a monthly basis, CPI rose by 0.5% in June 2021, compared with a rise of 0.1% in June 2020. The inflation rate exceeded economists’ forecasts and passed the Bank of England’s stated target of 2%.

The consumer prices index including owner occupiers’ housing costs (CPIH) measure of inflation rose by 2.4% in the 12 months to June 2021.

Prices for food, second-hand cars, clothing and footwear, eating and drinking out, and motor fuel rose in 2021 but mostly fell in 2020, resulting in the largest upward contributions to the change in the CPI 12-month inflation rate between May and June 2021.

These were partially offset by a large downward contribution from games, toys and hobbies, where prices rose a year ago but fell this year.

Rachel Winter, associate investment director at Killik & Co, said: “Increased inflation in many instances remains a positive sign of much-needed economic growth. However, if inflation continues to creep away from the Bank of England’s 2% target, the central bank may be forced to act sooner than anticipated when it comes to raising interest rates.

“At the moment, rising inflation is thought to be a temporary blip caused by a variety of factors. One being the high oil price, which has resulted in increased prices for items such as petrol. Additionally, as ‘Freedom Day’ approaches, the hospitality industry has experienced a surge in demand as a result of the relaxation of coronavirus restrictions.”

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “Higher inflation was the last thing that savers needed. The average easy access rate is now 0.06%, and the most competitive without restrictions is 0.5%. Even tying your money up for 12 months will earn you a maximum of 1.1%, which is less than half the rate of inflation.

“It means we need to hunt down the best possible rate, so our savings work as hard as possible. For any cash beyond our emergency savings of three to six months’ worth of essential expenses it’s worth considering tying it up for a better rate.

“Most people think it’s not worth bothering to switch, because rates are so low right now. It’s why the majority of our savings is still stuck in easy access accounts with the high street giants earning 0.01%. However, you can make 50 times the interest in the most competitive easy access accounts and you have to ask yourself what the alternative is. If you’re going to sit tight and wait for your bank to offer you more, you could be in for a hell of a wait, because the market expects the Bank of England to keep rates at 0.10% until 2023.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

The savings accounts paying the most interest

It’s time to get your finances in shape, and moving your cash savings to a higher paying deal is a good plac...

Everything you need to know about being furloughed

Few people had heard of ‘furlough’ before March 2020, but the coronavirus pandemic thrust the idea of bein...

The experts’ guide to sorting out your personal finances in 2021

From opting to ‘low spend’ months to imposing your own ‘cooling-off period’, industry experts reveal t...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Money Tips of the Week