Inflation slowed in November 2022, dropping to 10.7%. The figure, announced by the Office for National Statistics (ONS) today, is still at a 40-year high and has been above 9% since April 2022.
The Consumer Prices Index (CPI) measure of inflation is down from 11.1% in October 2022, and it hasn't been at this level since 1982.
CPI tracks the cost of an imaginary ‘shopping basket’ of around 700 popular goods and services. November's inflation was driven by falling prices for petrol and diesel, offset by price rises mainly from alcohol sold in hospitality venues and the increasing cost of food.
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.
Why has inflation fallen?
A drop in the price of petrol and diesel is the main cause of November's inflation fall. But average fuel prices are still much higher than in 2021. The ONS says in November 2022, petrol and diesel prices stood at 163.6p and 187.9p per litre respectively. Compare to the same month last year, and average prices stood at 145.8p and 149.6p per litre.
Other commodity prices are also going down and helping to slow the rate of inflation. Transport costs and the price of used cars are also falling at a faster rate than previous months
These price drops, however, were offset by price rises for alcohol in restaurants, cafes and pubs.
Meanwhile food prices continued to rise, with annual food inflation hitting 16.5% - the highest rate for 45 years - up from 16.4% in October.
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 type | Account | AER | Terms |
|---|---|---|---|
| Five-year fixed-term savings account | Melton Building Society Fixed-Rate Savings (until 23 February 2028) | 4.9% | £10,000 minimum deposit |
| Five-year fixed-term cash Isa | State Bank of India Five-Year Cash ISA Fixed Deposit | 4.65% | £5,000 minimum deposit |
| Four-year fixed-term savings account | Gatehouse Bank Four-Year Fixed Term Woodland Saver | 4.65% (EPR*) | £1,000 minimum deposit |
| Four-year fixed-term cash Isa | Gatehouse Bank Four-Year Fixed Term Woodland Cash ISA | 4.2% (EPR*) | £1,000 minimum deposit |
| Three-year fixed-term savings account | Nottingham Building Society Fixed-Rate Savings Account (until 14 February 2026) | 4.65% | £500 minimum deposit |
| Three-year fixed-term cash Isa | State Bank of India Three-Year Cash ISA Fixed Deposit | 4.65% | £5,000 minimum deposit |
| Two-year fixed-term savings account | Melton Building Society Fixed-Rate Savings (until 23 April 2025) | 4.75% | £10,000 minimum deposit |
| Two-year fixed-term cash Isa | State Bank of India Two-Year Cash ISA Fixed Deposit | 4.65% | £5,000 minimum deposit |
| One-year fixed-term savings account | SmartSave One-Year Fixed-Rate Saver | 4.32% | £10,000 minimum deposit |
| One-year fixed-term cash Isa | Nottingham Building Society Fixed-Rate Isa (until 14 March 2024) | 3.85% | £500 minimum deposit |
| Instant-access savings account | Al Rayan Bank Everyday Saver | 2.81% (EPR*) | £5,000 minimum deposit |
| Instant-access cash Isa | Earl Shilton Building Society Instant Access Cash ISA | 2.55% | £10 minimum deposit |
Source: Moneyfacts. Correct as of 14 December 2022, but rates are subject to change. *The accounts from Gatehouse Bank and Al Rayan 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 reached record highs lately, it’s been more than a year since any account has matched the inflation rate, according to analysis from Moneyfacts.
- Find out more: how to find the best savings account
Savings rates are high, but for how much longer?
We’ve seen savings rates reach highs of 5% over the past month. But there are signs they may have peaked.
Now that increases to the Bank of England’s base rate (currently 3%) are expected to be more modest than before, providers are reviewing their market positions, particularly when it comes to fixed rates which were priced higher because of the prospect of future, steeper interest rate hikes to tackle soaring inflation.
It’s likely we will see further falls and more savings deals pulled as providers adapt to a calmer economic outlook.
In the meantime, however, interest rates for instant-access cash Isas and savings accounts are still increasing. But, unlike fixed-term rates, these are variable and can change at any time, so it's a good idea to keep track of your rate to make sure you're still getting a competitive deal.
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 November 2021 and bought them all again the same month in 2022, you could expect your shop this year would be 10.7% 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.
- Find out more: how to find the best cash Isa
How to cut costs when prices are still high
While the price of petrol and diesel is falling, it's still way above what it was this time last year. We've put together a guide full of helpful and practical tips on making the most of whatever fuel powers your car.
Yes, avoiding more expensive petrol stations is one obvious way to cut costs on fuel, but you can also save money on the running of a car by making a few small changes to how you drive.
One of the biggest strains on household budgets is, of course, the cost of grocery shopping. Our supermarket food and drink inflation tracker shows price hikes of up to 175% on everyday budget and own-brand products.
It's more important than ever, therefore, to shop around. Our latest research has found the cheapest supermarket in November, while we also have tons of handy tips on how to spend less during your shopping trip, from avoiding convenience stores to switching grocery ranges.
Finally, our Affordable Food For All campaign is calling on the big supermarkets to take action and make a real difference to communities across the UK. You can sign the petition here.
Get further help with the cost of living
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