Five Questions About: Inflation

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Going up again, is it?

No. Official figures published this week showed that it's fallen to a three-year low of 2.2 per cent.

Well that's something to celebrate, isn't it?

Not really. It's a short-term fall. The latest energy price increases announced in recent days of up to 9 per cent will push inflation back up again as soon as they hit next month, with customers of SSE already being forced to cope with higher bills. September's figures are also, unfortunately, used to set increases in state pensions and benefits which could mean a paltry weekly increase next year of just £2.69 for Britain's elderly.

But that £2.69 will buy more food, won't it?

The lower inflation figure isn't because of cheaper bills. In fact, the fall is more because it's been a year since the last major energy hikes, so their effect no longer affects the annual measure. As it happens, food is expected to increase in price because of poor grain harvests.

So is there good news?

For savers, yes. They now need to earn 2.75 per cent to beat inflation, and there are several deals around the 3 per cent mark.

What if I'm a higher-rate taxpayer?

You'll need to earn 3.67 per cent. Look at tax-free Isas for the best chance of inflation-beating returns.