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Difference between CPI and RPI
- Consumer Prices Index (CPI)- based on an EU-wide formula allowing direct comparison of the inflation rate in the UK against that in the rest of Europe.
- Retail Price Index (RPI) is an average measure of change in the prices of goods and services. Once published, it is never revised.
- RPI-X - this is RPI excluding mortgage costs. It was previously the target measure for the MPC with a symmetrical target of 2.5%
- RPI-Y - this is RPI with both mortgage costs and the impact of changes in taxation removed.
The Bank of England is legally obliged to set interest rates so that the Consumer Price Index is below 3%. Previously the RPI-X figure had been set so as not to exceed 3.5%, but as the CPI figure focusses on a narrower basket of goods, many manufactured and excluding items such as rent and council tax, it is considerably lower. In February 2007 the CPI figure was 2.7% while the RPI figuire was 4.5%.
See also
External Links
- Inflation goals to move again - Mervyn Somerset-Webb, Moneyweek, 16 September 2005
- Inflation February: CPI up to 2.8%, RPI up to 4.6% - Office of National Statistics]