It is the last thing that anybody was expecting, but the rate of inflation (according to one measure at least) has actually dropped.
What inflation does to your savings
The Consumer Price Index fell to 4% during march, down from 4.4% in February. It is thought that cheaper food and drink was what helped lower the rate of inflation. It is the last thing anybody predicted, and some are warning that thiis will be just a temporary dip in a otherwise upward trend.
Really this does not qualify as good news for anyone except borrowers on variable rate mortgages. The dip in inflation will give ammunition to those who want to keep interest rates at their current low level for longer. It is thought that what lowered prices and therefore inflation during March was retailers responding to low consumer confidence.
The cost of bringing goods to market has continued to rise. Tax, below inflation pay rises and fears over job security have all meant that consumers have been unwilling to shoulder the increased cost of goods. Retailers have been left with little choice but to take a hit on profitability in order to keep sales volumes up.
Whether this can be counted as being good news for savers is highly doubtful. Although the drop in inflation means that mathematically speaking there are a few more saving products that will return a real-terms profit after tax concerns, the picture is not a happy one. Inflation seems likely to resume its upward trajectory sooner rather than later, and in addition to this it makes further miserable low interest rate months more likely. For financial planners there are a lot of unknowns in the equation at the moment. The direction of both inflation as well as interest rates will be the things that they will bee looking to divine when they are peering into their crystal balls however.
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