The UK's inflation rates unexpectedly slowed down last month, which could see a knock-on effect on interest rates and people's savings accounts.
In March the official inflation rate, the Consumer Price Index, only rose by 1.8 per cent, compared to a two cent rise in February.
This small increase is not in line with the Bank of England's (BoE) two per cent target and inflation is now at its slowest pace in over a year.
The slow level of growth could prompt some to call for the BoE to cut interest rates, which could have an adverse effect on savings accounts and how much money people can earn from interest accrued on their savings account.
However, others argue that interest rates will probably not be shifted for its current steady rate of 4.5 per cent, resulting in limited impact on savings accounts.
The recent fall in milk prices and the continuing decline of airfares has been blamed for the downward turn in the rate of inflation.
However oil prices and household utility bills have risen sharply and therefore put upward pressure on inflation rates.
Speaking to the BBC, Amit Kara, an economist at UBS commented that: "Going forward we are going to see gas price hikes coming through and I think the Bank [ of England] will continue to remain vigilant ahead of that. I don't think it will make much difference to their policy outlook in the near term at least."
With many savings accounts offering interest rates far higher than inflation, any decision to shift interest rates may have only a small impact on savings accounts. However, shopping around for the best rate on an savings account can result in the consumers finding the best deal for their financial needs.
Savings accounts could feel the effect of slowing inflation
Savings accounts could feel the effect of slowing inflation
Fri, 21 Apr 2006
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