Consumer price index (CPI)
What is the Consumer Price Index?
The Consumer Price Index (CPI) is the main measure of cost-of-living increases in the United Kingdom and the Bank of England's inflation target uses the CPI. The CPI is calculated monthly by the Office for National Statistics using a basket of goods and services.
Where have you heard about the Consumer Price Index?
The CPI is guaranteed to make the news each month even when it hasn't changed much. Increases in some welfare benefits are linked to the CPI and trade-union pay claims may cite the CPI in support. Financial advisers may refer to the CPI in order to show the 'real', inflation-adjusted, return on investments.
What you need to know about the Consumer Price Index...
An accurate measure of changes in the cost of living is vital for a range of different people and organisations. Governments need to know how rapidly the currency is losing its value, businesses have to be aware of upward pressure on the prices of their goods and services and households require a reliable yardstick as to changes in their purchasing power. But no measure is perfect, and the CPI has been criticised in the past for leaving out housing costs. This changed in March 2017 with the focus moving from CPI to a linked index, 'CPIH'.