Economists had predicted that the Consumer Prices Index (CPI) measure of inflation, which tracks the cost of an imaginary 'shopping basket' of around 700 popular goods and services, would fall slightly to 6.6%.
As widely predicted, September's inflation figure isn't high enough to be used to boost the state pension next year.
Here, Which? explains why the inflation rate hasn't changed, and how it compares to the top-rate savings accounts and cash Isas. We also share tips for tackling the rising cost of living.
Why has inflation remained the same?
Soaring fuel costs are the main reason this month's inflation figure held steady. The ONS says the average price of petrol rose by 5.1p per litre between August and September 2023 to stand at 154p per litre last month. Similarly, diesel prices rose by 6.3p per litre this year to stand at 157p per litre.
There was some good news, however. The price of household appliances and plane tickets eased in the year to September, while the cost of food also dropped by 0.2% - the first monthly fall in two years. This was driven by a drop in the price of milk, cheese and eggs, and mineral waters, soft drinks and juices.
The graph below shows how inflation has changed since August 2020:
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 – hitting a rock bottom figure of 0.2% in August 2020 due to the impact of the pandemic.
State pension unlikely to rise in line with inflation
The state pension is protected by the ‘triple lock'. This is a protection that dates back to 2010 and guarantees pensions will be boosted each year by either September’s inflation, earnings growth (from the period between May to July) or 2.5% - whichever is highest.
Based on current wage growth figures, it would mean a rise of 8.5% from April 2024. However, the government may decide to exclude bonuses from its calculation, lowering the wage growth figure to 7.8%.
Find out more:Can any savings rates beat CPI inflation?
The closer your savings rate is to the rate of inflation, the less value your cash will lose over time. That's why you should ensure that your money is getting the best interest rate possible – even when savings account rates are comparatively low.
This table shows the top rates for fixed-term and instant-access cash Isas and savings accounts, ordered by term.
Challenger banks continue to dominate the market and, when it comes to fixed-rate savings accounts, one-year products offer the best returns.
Despite a handful of accounts offering rates of more than 6% AER, it is still not enough to touch this month's inflation figure. But don't wait for that to happen before opening a savings account. In the time that you're holding out for a better deal, high inflation means any cash held in a current account is losing value and probably earning little to no interest.
These top rate deals don't hang around for long either, so savers should act quickly to avoid disappointment. This week, Moneyfacts data showed average rates on longer-term bonds fell for the first time in over six months.
Moneyfacts spokesperson James Hyde explains that the Bank of England's decision to pause the base rate at 5.25% has led to 'a cooling' in the rise of top savings rates. However, he says rates on easy-access accounts are still going up.
Find out more:How to cut costs when prices are still high
The decrease in inflation over the last few months doesn't mean prices are falling; it just means they're rising at a slower rate than before.
source https://www.which.co.uk/news/article/inflation-remains-at-6.7-in-september-2023-can-any-savings-rate-beat-it-auYXW6H8EYTB