How to read a UK RPI report
The Retail Price Index is older than CPI, controversial among statisticians, and still embedded in billions of pounds of index-linked gilts and rail fares. This guide explains what RPI measures, why it consistently runs above CPI, and when — and when not — to use it.
Understand what RPI is — and is not
The Retail Price Index (RPI) is the UK's oldest consumer price measure, published since 1947. Unlike CPI, RPI includes mortgage interest payments and house depreciation costs — making it significantly more sensitive to Bank of England rate changes than CPI. When the BoE raises rates, RPI rises faster than CPI (because mortgage costs go up); when rates fall, RPI falls faster.
RPI was stripped of its National Statistics status in 2013 by the UK Statistics Authority — which judged its formula to be methodologically flawed. The specific problem is the "formula effect": RPI uses arithmetic averaging of price relatives within categories, while CPI and HICP use geometric averaging. Arithmetic averaging produces a systematically higher index level than geometric averaging when prices vary. This is not a matter of opinion — it is a mathematical certainty. The gap is typically 0.5–0.8 pp per year, which is why RPI consistently runs above CPI.
Identify what RPI is still used for — and why it matters
Despite its flawed status, RPI remains embedded in the UK financial and legal system because it is locked into contracts that predate the methodological debate. The key areas are:
- Index-linked gilts (ILGs): The UK government issues index-linked gilts whose principal and coupon are uprated by RPI. These represent hundreds of billions of pounds of outstanding debt. Switching to CPIH uprating would reduce the UK's debt interest costs significantly — which has made it a politically charged question.
- Rail fares: Annual regulated rail fare increases are capped at RPI (or RPI + a fixed percentage). Because RPI runs above CPI, rail passengers face higher real fare increases than the CPI headline implies.
- Some private contracts: Some commercial leases and salary agreements still use RPI as the escalation measure.
When reading any RPI-linked contract or financial product, ask: would the outcome differ if CPIH were used? The answer is almost always yes, because RPI will be ~0.5–0.8 pp higher over time. For index-linked investments, this means an RPI-linked bond provides better inflation protection than a CPIH-linked one — at a cost to the issuer.
Read the ONS RPI release — key tables and data
The ONS publishes RPI alongside CPI each month in the Consumer Price Inflation statistical bulletin. To read it effectively:
- Table 1: The headline numbers — CPI, CPIH, RPI, and RPIX (RPI excluding mortgage interest payments). RPIX was the Bank of England's target measure from 1992 to 2003. Compare CPI to RPI in the same table to see the "formula effect" in real time.
- Mortgage interest payments (MIPs): The component that most distinguishes RPI from CPI. When the BoE raised rates from 0.1% to 5.25% in 2022–23, MIPs surged — pushing RPI well above CPI. The difference narrowed as rates stabilised.
- Owner-occupier housing costs (OOH): CPIH adds OOH costs (using a rental equivalence approach), while CPI excludes them. This makes CPIH the most comprehensive measure, and the ONS's preferred headline since 2017. Reading all three (CPI, CPIH, RPI) side by side tells you the housing cost story.
The ONS monthly CPI bulletin is the primary source. The data tables are available in Excel format at the bottom of each release.
Understand when to use RPI vs CPI vs CPIH
The right measure depends on your purpose:
- For monetary policy and Bank of England analysis: CPI (the BoE's official target) and CPIH (the ONS's preferred measure).
- For index-linked gilt pricing and valuation: RPI (unavoidable — it is written into the gilt terms).
- For rail fare forecasting: RPI (regulated fares are RPI-linked).
- For household budget analysis: CPIH (includes housing costs; most representative of total living costs).
- For international comparisons: UK HICP (comparable to Eurostat's HICP for EU countries).
For most everyday purposes — understanding whether your purchasing power is keeping up — CPI or CPIH is the right measure. RPI's systematic upward bias means it overstates inflation relative to international best practice. Our CPI vs CPIH explainer goes deeper on the UK-specific distinctions.
Track the RPI-CPI wedge over time
The typical gap between RPI and CPI is 0.5–0.8 pp, but it varies significantly. The gap widens when: (1) mortgage interest rates rise rapidly (adding to RPI but not CPI); (2) house price inflation is high (house depreciation is in RPI); (3) used car prices diverge sharply (different measurement approaches). The gap narrows or can even temporarily reverse when: mortgage rates fall sharply; the housing market softens.
For investors in index-linked gilts, the RPI-CPI wedge is a form of "formula risk" — if the ONS ever changes RPI methodology to match CPI (which the UK Statistics Authority has recommended), ILG holders would receive lower uprating than under current RPI. This "reform risk" is priced into the market: RPI-linked gilts trade at a higher real yield than they would if there were no uncertainty about RPI's future. The UK Debt Management Office publishes the full ILG prospectus and methodology.