Inflation rate falls to 3.9% in November 2023 - which savings deals can beat it?
Inflation as measured by the Consumer Prices Index (CPI) eased to 3.9% in the 12 months to November 2023, according to data from the Office for National Statistics (ONS).
It's the second month in a row the annual rate has fallen, after plunging sharply to 4.6% in October 2023, and is at its lowest point in more than two years.
The latest drop means many savings accounts are offering inflation-busting rates - but remember, the decrease doesn't mean prices are falling; it just means they're rising at a slower rate than before.
Here, Which? explains why the inflation rate is going down, and how it compares to the top-rate savings accounts and cash Isas. We also share tips for tackling the rising cost of living.
Why has inflation fallen?
The fall in the annual rate of inflation was driven largely by a drop in transport, recreation and culture, and food and non-alcoholic beverages costs.
Motor fuels in particular helped drive the inflation rate lower. The ONS said the average price of petrol fell by 4.1p per litre between October and November 2023 to 151p per litre, down from 163.6p per litre in November 2022. Diesel prices fell by 3.2p per litre to 159p per litre, down from 187.9p per litre in November 2022.
A slight fall in the price of games, toys and hobbies (particularly computer games), and cultural services (particularly admission fees to theatres and live music events) also contributed. However, the ONS warned 'short-term movements in these categories should be interpreted with a degree of caution, as these movements depend on the composition of bestseller charts and the acts that are performing respectively.'
The easing in the annual rate for food and non-alcoholic beverages was driven by a drop in the price of bread and cereals. Prices of a variety of bread products (including white and wholemeal sliced loaves) and packs of cakes all fell between October and November this year.
The graph shows how inflation has changed since August 2020:
The Bank of England’s target is to keep inflation as close to 2% as it can, but it hasn’t been that low since July 2021. Before that, inflation was very low – hitting a rock-bottom figure of 0.2% in August 2020 due to the impact of the pandemic.
Can any savings rates beat CPI inflation?
The pace at which prices have risen since 2021 has meant nest eggs have been slowly losing value over time - that's despite savings rates enjoying 15-year highs. Last month's dramatic drop in the CPI figure meant, for the first time in two years, savers could finally find inflation-busting deals.
But is that still the case today? We took a look at the latest Moneyfacts data to find out.
This table shows the top rates for fixed-term and instant-access cash Isas and savings accounts, ordered by term.
| Account type | Account | AER/EPR | Terms |
|---|---|---|---|
| Five-year fixed-term savings account | UBL UK 5-Year Fixed Term Deposit | 4.81% | £2,000 minimum deposit |
| Five-year fixed-term cash Isa | UBL UK 5-Year Fixed Rate Cash Isa | 4.81% | £2,000 minimum deposit |
| Four-year fixed-term savings account | Gatehouse Bank 4-Year Fixed Term Woodland Saver* | 4.65% | £1,000 minimum deposit |
| Four-year fixed-term cash Isa | Gatehouse Bank 4-Year Fixed Term Woodland Cash Isa | 4.7% | £1,000 minimum deposit |
| Three-year fixed-term savings account | Hanley Economic Building Society Fixed Rate Bond | 5.35% | £1,000 minimum deposit |
| Three-year fixed-term cash Isa | UBL UK 3-Year Fixed Rate Cash Isa | 4.87% | £2,000 minimum deposit |
| Two-year fixed-term savings account | Union Bank of India (UK) Ltd Fixed Rate Deposit | 5.4% | £1,000 minimum deposit |
Source: Moneyfacts. Correct as of 20 November 2023 but rates are subject to change. *The accounts from Gatehouse Bank and Al Rayan Bank are Shariah-compliant and so pay an 'expected profit rate' (EPR) as opposed to an 'annual equivalent rate' (AER).
Today's drop in CPI is good news for savers as all of the market-leading accounts can now help you beat inflation.
However, you'll need to act quickly to grab an inflation-busting deal, as rates on fixed-term accounts are dropping fast.
The average one-year fixed bond, Moneyfacts data shows, fell for a consecutive month in December, from 5.36% AER to 5.13%. It's the biggest month-on-month fall since February 2009. While the average longer-term fixed bond fell from 5.02% AER in November to 4.76% in December - it hasn't dropped by that much in a month since December 2012.
Average rates on fixed Isas have also plummeted, falling below 5% AER for the first time since July 2023. The month-on-month drop from 5.2% to 4.99% is the biggest since February 2013. Similarly, the average longer-term fixed Isa rate plunged for a consecutive month in December, falling by 0.27 percentage points to 4.65% AER.
Savers looking to open an instant-access cash Isa, however, will be pleased to hear that rates are still going up. The average rate for this type of account rose month-on-month from 3.29% AER to 3.31% in December.
- Find out more: best savings accounts 2023
How to cut costs when prices are still high
The fall in the rate of inflation over the past few months doesn't mean prices are lower; it just means they're rising at a slower rate than before.
Food prices, for example, remain much higher than they were a couple of years ago. We have lots of advice to help you cut costs on your grocery shopping, plus our monthly analysis reveals which is the cheapest supermarket for a big and small trolley of groceries.
If you want to save on games and toys for Christmas Which? experts have rounded up the best offers on the Nintendo Switch, PlayStation 5 and Lego and will be hunting for deals throughout the winter sales.
- Find out more: get expert Which? advice, news and podcasts on cutting costs on our cost of living help page
