RPI and CPI have been in the news a lot recently, but what do they actually mean and why are they used to measure inflation?
RPI (the retail price index) is basically a measure of how much the price of certain goods and services has increased. Essentially the cost of the same basket of goods and services is assessed and this gives an indication of how much more expensive these items have become. The particular basket of goods and services used to calculate RPI includes mortgage costs.
CPI (the consumer price index) is very similar to RPI. It is also a measure of how much the price of certain goods and services has increased. However CPI does not include mortgage costs. The UK government has set targets for CPI, so this is the measure of inflation that politicians pay the most attention to.
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