# Inflation



## Tubbs (25 Aug 2005)

(Not sure where to put this question)

What rate is inflation at and where is it published ?

What/who is used to calculate inflation ? 

Specifically, just wondering by how much my money is dwindling away in value being sat in a current account. 

I am taking steps to put it into Northern Rock 3.05% CAR gross. 
In regards to the real value of money - will i be winning by doing this  ? 

Or theoretically am I better off spending it on products at todays price before they go up due to inflation ?

Ta


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## ajapale (25 Aug 2005)

The consumer price index is compiled and published by the cso. As of mid July the cpi stood at just below 2.5%.

ajapale


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## tyoung (26 Aug 2005)

Your real return depends on your marginal tax rate. If you are in the 0% bracket your real return is about .5%. If your marginal rate is 42% your real return is about minus .8%. These rates of return will vary as interest rates and inflation change.
 Whether it's worth saving depends on what your saving for. If it's clothes or a computer, prices are actually falling as the link to the CSO shows. However if your saving for a deposit on a house it certainly has been frustrating.
BTW the most effective way to increase the savings rate would be to increase interest rates or at least offer some degree of tax relief on interest income.
 Regards


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## Brendan Burgess (26 Aug 2005)

Hi T

As usual, a good insight into the issue regarding the different rates applying to different categories.

However, the marginal rate is not relevant as all deposit interest is taxed at 20% at source and there is no further tax to pay or reclaim.

Brendan


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## tyoung (26 Aug 2005)

Thank you Brendan
 So his real return is close to 0?
 3% minus 1/5 equals 2.4%
 minus 2.5% equals minus .1


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## Brendan Burgess (26 Aug 2005)

The real return is zero. But the long term risk of leaving money on deposit is very high. A sudden burst of inflation would do great damage to his deposits. 

Brendan


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## tyoung (27 Aug 2005)

A real 0 or negative return on savings is immoral. It discourages saving, encourages borrowing,debt and speculation. The authorities should have acted ages ago.


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## ClubMan (27 Aug 2005)

What authorities? The _ECB_? And what should they do? Increase interest rates just for _Ireland_? I presume you don't mean that "the authorities" should dictate to financial institutions what minimum rate of deposit interest that they should offer or anything silly like that?


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