Inflation falls to 4.6% – consumer credit industry reaction

UK inflation fell sharply in October to 4.6 per cent, its lowest rate in two years, down from 6.7 per cent the month before, according to the Office for National Statistics (ONS).

Commenting on the date Andy Mielczarek, Founder and CEO of SmartSave, a Chetwood Financial company, said “Any drop in the rate of inflation is welcome news, and many Britons might be feeling a sense of relief that the worst of the cost-of-living crisis could finally be behind us.”

“As consumers feel the pinch on their budgets loosen, they should take advantage of the opportunity to consider revamping their savings strategy. In particular, those holding significant sums in easy-access high-street savings accounts, many of which continue to offer paltry rates, could end up missing out on better returns in the months to come.”

“The onus is on savers to search carefully for the right product and provider. For instance, as inflation continues to fall, those feeling more confident about setting money aside in a fixed-term savings account are likely to achieve better returns than those in easy-access or current accounts. And looking beyond the high street remains crucial when shopping around for the most competitive rates.”

Paul Noble, CEO of challenger bank JN Bank UK, said “It is only a matter of time before many banks start to drop their interest rates on their savings products. Savers should consider locking in higher interest rates for the long-term before they fall.”

“While falling inflation is of course positive for the UK economy, it increases the speed of already-falling interest rates offered by the banks, and that has an impact on consumers and their money.”

“It is therefore vitally important for savers to shop around to ensure their money is working as hard as possible by accessing savings accounts with the highest interest rates.”

“Now is the time for savers to protect their savings. There are a host of great high interest options out there if savers look beyond the big names. For example, £25,500 saved into a 5-year fixed rate at 6% earns £8,217.84 in compound interest over the five years – a 32% rate of return.”

James Smith, Research Director at the Resolution Foundation, said “Inflation fell at its fastest annual rate in over four decades last month, as last year’s surge in energy bills fell out of the data. Such a sharp fall will be welcomed by policy makers and the wider public alike. But the cost-of-living crisis is far from over as the scale of Britain’s inflation shock has left a legacy of far higher prices.”

“Over the past two years, the cost of energy has surged by 49 per cent while food prices have risen by 28 per cent – far greater than the 14 per cent in average earnings over this period.”

“The sharp rise in the cost of these essentials mean that lower-income households have experienced the biggest inflation shock, and shows the very real risks to their living standards if the Chancellor does not fully uprate benefits in line with prices to maintain their real-terms value.”

Inflation tumbles to lowest in 2 years – but it’s not downhill all the way

Sarah Coles, Head of Personal Finance, Hargreaves Lansdown said  “Inflation has tumbled to 4.6% – smashing the government’s target to halve by the end of the year, and hitting its lowest point in two years. It’s still way above the Bank of England’s target of 2%, but it’s heading in the right direction. Unfortunately, we can’t get too excited, because it’s not going to be downhill all the way from here.”

“One of the biggest drivers of the fall in inflation has been the lower energy price cap in October, which cut prices by 7%. This is compared to a huge hike the same time last year, so the different is striking. Gas is down 31% in a year and electricity down 15.6%. It’s worth highlighting that despite this dramatic drop, prices are still eye-watering compared to where we were before all this kicked off, which means keeping warm this winter is going to be a horribly expensive business.”

“Food price changes also fed into lower inflation. Food and non-alcoholic drink inflation is down from 12.1% last month to 10.1%, and the prices of some staples including milk and butter have actually fallen. However, this doesn’t mean cheaper weekly shops are commonplace, because there’s every chance that trollies are still packed with items that are still rising in price, and some that are soaring, including olive oil up 50.2%, sugar up 49.6%, frozen vegetables up 21.1% and sauces and condiments up 20.6%.”

“Petrol prices actually rose a little during the month, up 1.5p per litre to 155.1p per litre, reversing some of the earlier falls. The Competition & Markets Authority said part of the blame lies at the door of retailers who were inflating their margins. However, fuel remains cheaper than this time last year, so petrol is down 5.2% in a year and diesel 11.8%. The month-on-month rise in fuel prices was partly offset by second hand cars, which saw a huge price drop – down 3.6% in a month. The second hand car bonanza of the pandemic appears to be unwinding as higher costs take their toll.”

“All of these things are excluded from the core inflation measure, which the Bank of England also keeps a close eye on. This fell from 6.1% to 5.7%. It’s nowhere near as a dramatic a drop as overall headline inflation, but the fact it has continued to decline will be music to the earns of the Monetary Policy Committee.”

“One notable increase was in the cost of alcoholic drinks. Thanks to higher duty levels, the price of fortified wines is up 15.3% and beer is up 12%. With even higher duty rumoured to be due in the Autumn Statement, it could make a Christmas tipple an expensive way to celebrate this year.”