Low base rate could cost savers £43bn
Campaign group Save our Savers today revealed the cost to savers of the Bank of England’s decision to hold the base rate at 0.5% for the 33rd successive month.
The group estimates that the low interest rate combined with a retail price index at 5.6 per cent, its highest level for 20 years, and a consumer prices index rate of 5.2% will cost savers £43 billion over the next year.
Save our Savers believes that the Bank of England’s strategy has caused the value of sterling to fall by 25 per cent since 2007.
According to Moneyfacts.co.uk the average new instant access account offers 0.93% interest, compared with 4.21 per cent in November 2007.
These low interest rates, together with a high level of inflation mean that it is impossible for savers to protect the value of their savings.
Save our Savers has accused the Bank of England of “failing in its statutory duty” and it wants the government to intervene.
It believes that the Monetary Policy Committee may have acted illegally in letting inflation exceed its stated target of 2 per cent.
According to analysts, an increase in the base rate is unlikely until mid-2013 in the face of the weak UK economy and the ongoing crisis in the eurozone.
In addition to maintaining a low base rate, the Bank of England pumped another £75 billion into the economy last month through its quantitative easing programme.
New figures from the ONS revealing that producer price inflation fell to 5.7% on October, compared with 6.3% in September.
The reduction in producer price inflation, which reflects the price of goods at the factory gate, together with poor September trade figures, is likely to be seen by the Bank of England as an indication that the quantitative easing programme should continue despite high consumer price inflation.