CPI falls to 0.2% due to lower spending in restaurants, airlines and shops, and the drop is good news for cash deposits.
Savers have been given a surprise boost after inflation fell last month to 0.2%, with more than 500 deals now beating this metric.
Data from the Office for National Statistics (ONS) shows the consumer prices index (CPI) dropped to this figure during August, from 1% in July.
The cost of living measure was pushed down by lower bills in restaurants and cafes during the ‘eat out to help out’ discounted meals scheme, as well as falling air fares and slower growth in clothing prices, the ONS said.
Financial researchers Moneyfacts say there are now 531 savings deals that beat inflation, including easy-access accounts, fixed rate bonds and cash ISAs.
This compares with just 91 last month and 191 inflation-beating products this time last year.
Rachel Springall, finance expert at Moneyfacts, says: “Savers may be looking to have complete flexibility with their cash right now due to the coronavirus pandemic and thankfully they will find respite this month due to a sharp fall in inflation.
“Speed is crucial when it comes to applying for the top savings rates in the market and if consumers wait too long then they could see deals cut or pulled from the market entirely.”
Springall predicts that most savers will flock to easy-access accounts but says the most competitive deals are currently on short-term fixed rate bonds.
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However, it may be harder to find a competitive deal next year with inflation predicted to climb to 1.8% by the third quarter of 2021.
Kevin Brown, savings specialist at Scottish Friendly, adds: “People may still feel some sense of duty to support the economy but first and foremost the priority will be on safeguarding their family finances.
“We have seen retail saving patterns fluctuate over recent months as the usual balance between income and expenditure has been disrupted.
“We expect this trend to continue with many households taking an irregular approach to saving while spending levels continue to rise and fall.”
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