Inflation rumoured to stay above 3% for rest of 2012

Rumour has it that the nation’s inflation rate is going to persist in staying above 3 per cent for the remainder of 2012 – news that has made savers gnash their teeth and rend their garments in frustration.

While previous expectations were that the rate of inflation would decline to 2 per cent – the target set by the Bank of England – the Bank recently reported the likelihood of the Retail Prices Index remaining at least 1 percentage point beyond that target rate.  The RPI, one of the metrics used to measure inflation, would most likely remain high due to tax increases and high energy prices, Bank officials predicted.

The Centre for Economics and Business Research’s Scott Corfe commented on the issue, remarking that the Centre had an expectation that the rising cost of living will decline more slowly in 2012 than originally expected, due in part to the rising price of oil.  Mr Corfe added that the RPI is expected to creep much closer to its target rate in 2013, with an expected inflation rate of 2.7 per cent.

High inflation has played havoc with the nation’s savings products, especially as many of these savings accounts offer rates of return that put them underwater in regards to actual gains after the inflation rate is taken into account.  Low rates on savings products means that even the highest-paying savers are too low to beat inflation – especially after taxes are taken into account – and with the limitations placed on tax-free savings products such as cash ISAs, those looking to avoid the erosive effects of high inflation can be hard-pressed to discover solutions that do not involve locking their money away for long fixed terms.

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