Inflation falls to 1.6pc
The Retail Prices Index, which includes housing costs, fell to 2.5% from 2.6%.
Tony Wilson, head of strategy at the foreign exchange specialists FEXCO, said: “Inflation speaks louder than words.
“The prospect of an interest rate rise this year is now firmly off the table – with many predicting that the hike may not come until the second quarter of 2015.”
And he added: “In a week where the currency markets were primed to scour the MPC minutes for clues to the future of interest rates, today’s surprisingly large fall in CPI offered more concrete insight into the likely course of the Bank of England’s monetary policy.
“With CPI now comfortably below its 2% target, the Bank has no need to use interest rates to tame inflation. Despite the contradictory messages given by Governor Carney, the doves clearly still rule the roost.
“The runes of tomorrow’s MPC minutes will add more detail, but for now the markets’ assumption that rate rises are once again in the long grass has sent Sterling down across the board.”
But Moneyfacts says savers are continuing to get a raw deal.
To beat inflation, a basic rate taxpayer at 20% needs to find a savings account paying 2% per annum, while a higher rate taxpayer at 40% needs to find an account paying at least 2.67%.
Of the 650 non-ISA accounts in the market today, there are 86 that basic rate taxpayers can choose to negate the effects of tax and inflation.
ISAs, however, present a slightly better picture with 84 out of 223 offering rates that beat inflation.
The effect of inflation on savings means that £10,000 invested five years ago, allowing for average interest and tax at 20%, would have the spending power of just £8,713 today – a fall of 12.87%.
Sylvia Waycot, editor at Moneyfacts.co.uk, said: “Today there are a total of 873 savings accounts on the market, but only 170 (86 fixed bonds and 84 ISAs) pay enough interest to negate the effects of tax and inflation*.
“The average easy-access account pays a miserable 0.66% as opposed to 0.67% last year.
“The average interest paid across the ISA range is just 1.56%, while a year ago it was 1.66%.
“However, last year inflation hit 2.8% and Moneyfacts reported that there was only one savings account on the market that paid an interest rate that negated the effects of tax and inflation.
“Today, although savings rates are disheartening, savers do at least have a few accounts they can choose from that will leave them with some form of return after tax and inflation pressures.
“But until all accounts do this, savers will continue to get the raw deal that the industry appears to consider acceptable.”