The main driver was a drop in the cost of clothing and shoes, which the ONS says was due to an unusually high number of sales last month.
Read on to find out more about why inflation has dipped, and which savings accounts and cash Isas offer inflation-beating returns.
The best inflation-beating savings accounts
Our analysis of Moneyfacts data shows the proportion of savings accounts that beat inflation has remained static month-on-month.
1,784 savings accounts (82% of all products) currently offer rates higher than 2.8%. This includes instant-access and variable-rate deals, fixed-rate bonds and Isas.
This table shows the top rates currently available on savings accounts, ordered by term.
| Account type | Provider | Interest rate (AER) | Provider customer score | Minimum investment | Opening methods | Interest paid |
|---|---|---|---|---|---|---|
| Instant access | Chip | 4.76% | n/a | £1 | Mobile app | Monthly |
| Instant access cash Isa | Chip | 5.26% | n/a | £1 | Mobile app | Monthly |
| One-year fixed rate | Birmingham Bank | 4.67% | n/a | £5,000 | Internet | On maturity |
| One-year fixed rate cash Isa | Cynergy Bank | 4.55% | n/a | £500 | Internet | Anniversary |
| Two-year fixed rate | Birmingham Bank | 4.58% | n/a | £5,000 | Internet | Yearly |
| Two-year fixed rate cash Isa | Cynergy Bank | 4.44% | n/a | £500 | Internet | Anniversary |
| Three-year fixed rate | Birmingham Bank | 4.57% | n/a | £5,000 | Internet | Yearly |
| Three-year fixed rate cash Isa | Cynergy Bank | 4.43% | n/a | £500 | Internet | Anniversary |
| Four-year fixed rate | JN Bank | 4.51% | n/a | £100 | Internet | Yearly |
| Four-year fixed rate cash Isa | United Trust Bank | 4.2% | n/a | £5,000 | Internet | Anniversary |
| Five-year fixed rate | Birmingham Bank | 4.57% | n/a | £5,000 | Internet | Yearly |
| Five-year fixed rate cash Isa | Hodge Bank | 4.31% | n/a | £1,000 | Internet | Monthly, anniversary |
How savings track against inflation
It's important to choose an account with a rate above the current CPI figure. If the interest rate on your account is below inflation, your savings will effectively lose value over time.
This table shows how average savings rates have compared to inflation since August 2020, using data from Moneyfacts.
Average rates on one-year and longer-term bonds have beaten inflation since October 2023.
The average interest rate for an instant-access account is now back above inflation, having been slightly below the CPI figure in January.
What's happening to savings rates?
The average instant-access rate has dropped from 3.18% to 2.84% year-on-year, while the average one-year fixed rate has dropped from 4.61% to 4.15%.
However, there is some good news for savers. Cash Isa rates are rising in the run-up to the end of the financial year, with instant-access options seeing the biggest boosts. The best rate on a restriction-free account has jumped from 5.03% to 5.26% since last month's inflation announcement.
Isa rates are likely to stay competitive over the next month, with allowances due to reset at the start of the new tax year on 6 April.
Find out more:Why is inflation falling?
The biggest driver behind February's inflation figure was a fall in the price of clothing and shoes: primarily women's fashion, but also hats, scarves, and children's clothing.
The ONS explains the drop in clothing costs was down to retailers running an unusual number of sales events. Discounting usually fizzles out after the new year, and this is the first price fall between January and February since 2021.
There were small increases to the price of alcoholic drinks in February. This is likely due to duty on non-draught alcohol increasing from 1 February, following the announcement in the Autumn Budget.
While the CPI figure is significantly lower than the peak of 11.1% recorded in October 2022, it remains above the Bank of England's target of 2%.
It's also important to remember that even when inflation is at the Bank of England's target level, this doesn't mean prices are going down; it just means they're rising at a slower rate than before.
source https://www.which.co.uk/news/article/inflation-drops-to-2.8-how-to-find-the-best-savings-account-aHhso6D0QvU6