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UK savers fear rise in inflation

UK saves are today bracing themselves for more bad news on the income front with confirmation that UK inflation increased from 3.4% to 3.7% between March and April. Whether or not the rate will subside in the months ahead remains to be seen, but with many savings accounts paying less than 3.7% interest, in effect we are seeing many savers suffering a devaluation of their spending power.

The UK government is now under new pressure to assist UK savers who have effectively become the innocent victims of the UK economic downturn and the bounce in the rate of inflation. Quite what the government can do remains to be seen because ultimately savings rates are in many ways linked to demand in the marketplace and the UK base rate which currently remains steadfast after 0.5%.

UK financial companies can ill afford to increase their savings interest rates unless they are able to use the funds in question to finance higher income services such as mortgages, loans and other financial instruments. Until UK banks and UK financial companies are able to see a clear means of increasing their profitability it is unlikely we will see any significant increase in savings rates in the short-term.

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