RPI (Retail Prices Index)
What is the Retail Prices Index?
The Retail Prices Index is the UK’s principal measure of consumer price inflation. It is defined as an average measure of change in the prices of goods and services bought for the purpose of consumption by the vast majority of households in the UK. It is compiled and published monthly. Once published, it is never revised.
What is it used for?
Measures of inflation are vital tools for economists, business and government. The Bank of England’s Monetary Policy Committee sets UK interest rates on the basis of a target figure for inflation set by the Chancellor of the Exchequer. Wage agreements, pensions and changes in benefit levels are often linked directly to the RPI. Utility regulators impose restrictions on price movements based on the RPI. RPIX (all items RPI excluding mortgage interest payments) is the main economic measure used by HM Treasury and the Bank of England.
Which items are included in the Retail Prices Index?
The RPI includes data on food and drink, tobacco, housing, household goods and services, personal goods and services, transport fares, motoring costs, clothing and leisure goods and services. A list of price indicators used in the construction of each year’s RPI is available from the website.
Who gathers the prices?
Prices are collected in two ways. The local price collection is carried out by a market research firm who collect over 130,000 prices per month. ONS has procedures in place to quality assure the local price collection carried out by the contractors.
ONS staff collect a further 10,000 prices centrally each month for a number of reasons including efficiency (e.g. prices in catalogues, national newspaper prices, utility prices), availability (e.g. prices that may not be available in retail areas such as sea fares, road tolls, internet prices), prices that are methodologically difficult to measure (e.g. mortgage interest payments) and items where quality adjustments may be important (e.g. personal computers).
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