Chocolate prices surge, feeding inflation

It’s been a week packed with economic news – with both an inflation update and a base rate decision happening within a day of each other.  

The inflation data was released first, as this is important information for the Bank of England’s Monetary Policy Committee (MPC) to chew over when making their decision on interest rates.  

But it was not good news.

It was thought that inflation would ease slightly in May, as April saw a number of key price rises, such as energy costs and an increase in employer National Insurance contributions, which is why we saw the jump last month. However, the Office for National Statistics (ONS) confirmed that the rate of Consumer Prices inflation (CPI) remained at 3.4% in the 12 months to May 2025 – keeping the rising cost of living at the highest it’s been for more than a year.  

What has caused inflation to stick?

In general, a main concern for households will be that the cost of food increased faster in the 12 months to May 2025, than last month – up 4.4% year on year, from 3.4% in the 12 months to April. But this was spurred on by a record increase in the price of chocolate – soaring by more than 17% in the last 12 months due to poor harvests in the main cocoa producers of Ghana and the Ivory Coast.

Those who don’t eat chocolate therefore are likely to be less affected – remember that the headline rate of inflation is based on a huge virtual basket of goods and services that we, as a nation, consume. But we all consume different things, so will be affected differently.

It wasn’t just chocolate that has seen a significant increase in price. Meat, in particular beef and veal, has increased by 17% too. The price rise of chicken has also accelerated a little over the last month – but it’s a much more manageable 4.4%, so could be a more affordable option?

Taking a more positive view, the price of some clothing and footwear actually fell over the last 12 months, but by a much more underwhelming 0.3%.  

The bottom line though, is that prices are still rising by more than the government’s target of 2% - so this is something the Bank of England needs to take into consideration when deciding on what to do with interest rates. 

What does this mean for savers?

The good news for savers is that with base rate remaining at 4.25%, savings rates should not fall either – although it depends who you hold your cash with!

A number of high street banks are currently in the process of cutting the rates on their easy access accounts in particular – so if you are still holding cash with one of these banks, it’s time to move. With inflation sticking at 3.4%, leaving your cash to fester in a poor paying account will not only mean less interest paid to you, but your cash will be losing its purchasing power too.

For example, if you have £10,000 in an account with a high street bank earning 1.15% AER (NatWest Flexible Saver), with inflation at 3.4%, after just one year, although the total balance including accrued interest would be £10,115, the real value after inflation would be just £9,782! If you were to choose a more competitive account paying around 4.50%, not only would the total balance be more – at £10,450 - the real value would be positive too - £10,106. So, in this example, choosing the wrong account could hit your purchasing power by more than £300!  

We’ve got an easy to use Inflation Calculator which shows you exactly what the impact is of inflation on your own personal savings accounts. Just put in your balances and the interest rate you’re earning, and we’ll show you if you are in positive or negative territory! 

See how inflation is affecting your cash savings below:

Should I fix some of my savings? 

For those that don’t want or need to keep all their money in cash there are plenty of inflation beating options open to you, especially if you can lock some of it away.

With the current expectation that there will be at least two base rate cuts later this year, this would almost certainly lead to even more rate cuts to variable rate accounts, so locking in some of your cash could be a wise decision to hedge against this.

I’ve been pleasantly surprised to see that we have actually seen competition between key providers pushing the rates of fixed term accounts upwards recently.

In fact, the 1-year and 2-year top rates are now the highest they’ve been since early May,  with Cynergy Bank paying 4.55% AER and 4.45% respectively.

The top 3-year bonds with JN Bank and Birmingham Bank, are both offering 4.45% too.

Over 5-years the news has also been positive, as Birmingham Bank has upped its market- leading rate to 4.47% AER,  pipping the next best with Hampshire Trust Bank by just 0.01%.

Whilst the new better rates are only marginally higher, it does mean that savers have plenty of options to choose from that still beat inflation – especially if we see interest rates and inflation fall in the next few months and years.  

So, if you have been procrastinating, now could be the time to get on and fix some of your cash, especially if it’s languishing in a poor paying account whilst you decide when to make your move.

That said, remember that generally there is no access to your cash until maturity in a fixed rate bond and whilst fixed term cash ISAs do allow access, there is normally a hefty penalty. So, you do need to be comfortable that you don’t need the money that you are thinking of tying up.

Keep an eye on our Best Buy tables for the latest top rates. 

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The interest rates in this article are correct as at 20/6/2025.

This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.
The Financial Conduct Authority (FCA) does not regulate cash advice.