Can you explain the difference between RPI and CPI inflation?

Retail Price Index and Consumer Price Index are both indices that seek to measure the current level of inflation, that is the general rise in price levels across goods over the year. CPI is calculated using a 'basket of goods' that reflects what consumers would tend to buy (note, this may change over time with trends). This basket is then averaged to approximate the price level, and compared to previous data. The main difference with RPI inflation is that RPI incorporates the cost of living in its inflation level. This could be rent, or mortgage repayments. For this reason, RPI inflation tends to be higher than that of CPI.

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Answered by Matthew H. Economics tutor

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