Chart of the day: UK CPI inflation
The UK government came up with a new inflation data series in the 1990s to replace the RPI for tracking consumer price inflation. Many people believe this series, the CPI, understates the inflation actually experienced by consumers in the economy. The government describes the series this way:
The Consumer Prices (CPI) and the Harmonised Index of Consumer Prices (HICP) are the same index. The index has been designed as a macro-economic measure of consumer price inflation. It forms the basis for the Government’s inflation target which the Bank of England’s Monetary Policy Committee is required to achieve. It has been developed according to internationally agreed rules and is internationally known as the HICP. The HICP is used for international comparisons of inflation.
-UK National Statistics website
The CPI has been consistently lower than the RPI, which is used in collective bargaining agreements and final salary pension schemes. For example in April CPI inflation was 3.3% while the RPI was 4.2%. Nevertheless, what is evident from the graph above is that inflation has actually been rising throughout the tenure of the Labour government. While I believe inflation is still relatively under control, this view does provide reasons to worry.
This post is part of my chart of the day series.
For other posts about the UK economy, click on the label ‘UK‘.