money-22

Economists have been left surprised today (Tuesday) by the news that the UK rate of inflation fell to 2.6% in June, according to the Office for National Statistics (ONS).

Measured by the Consumers Prices Index (CPI), inflation was at 2.9% in May, having been steadily increasing since October 2016 as a result of the UK's decision to leave the European Union. The ONS said lower petrol and diesel prices, which fell for a fourth consecutive month in June, were the primary reason behind the overall drop.

The fall in inflation does not, however, mean that workers are getting a real-term increase in their pay. Excluding bonuses, wages were up 2% in June, meaning workers are still experiencing a 0.6% hit on their finances.

While a slower rate of inflation, and one closer to the Bank of England's official target of 2%, may appear a positive step, few economists are predicting this will signal the end of rising inflation.

Ross Andrews, director of fixed rate bond provider, Minerva Lending, said: "Inflation may have fallen back a few notches but many expect the cost of living to rise again before the year is out. The bad times for Britain’s savers, caught between historically low interest rates and stubbornly high inflation, are far from over.

"With the UK economy and political outlook still on uncertain ground, a rate rise anytime soon remains a pipe dream. Worse still, with interest rates having been so low for so long, it could take many years for the economy to be reacclimatised to the historical base rate average.
“Britain’s savers are staring down the barrel of another lost decade. More needs to be done to raise awareness of the savings risk, which is wreaking havoc with people's cash. Many people are still unaware that, in real terms, their savings are losing value.
"In previous years, people have turned to the property market to generate returns but these days that is looking less and less attractive. It’s no surprise more people are looking to alternative investments to keep their returns real. But when they do, they may wish to seek independent financial advice."