An inflation measure past its sell-by date?

An inflation measure past its sell-by date?

Why the days of the Retail Price Index (RPI) are numbered and how the market must catch up.

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Yael Selfin - Chief Economist at KPMG in the UK.

Chief Economist

KPMG in the UK

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AN INFLATION MEASURE PAST ITS SELL-BY DATE?- clothes folded in a pile

What is it you can measure and get three different answers, all of which are accurate? The answer to the riddle is inflation. In March 2019, the rate of UK inflation simultaneously stood at 1.8%, 1.9% and 2.4%.

The explanation, of course, is that three different price indices are currently used to measure consumer price inflation: Retail Price Index (RPI), the longest standing measure, Consumer Price Index (CPI), which is used by the Bank of England as its target and, the most recently added, Consumer Price Index including owner-occupiers’ housing costs (CPIH). But this is more than just a curiosity: these differences can cost you a lot of money.

In this article we explain how this can impact different users of inflation indices and the significance of a shift away from the most traditional measure of inflation.

Read the full report: An inflation measure past its sell by date?

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