What is RPI, and how does it differ from CPI?

RPI stands for the Retail Prices Index. It is one of two main measures of inflation in the UK, alongside CPI, the Consumer Prices Index. Both track changes in the price of a basket of goods and services over time. They cover broadly similar territory but use different methodologies, different baskets, and different formulas, which produces consistently different results. RPI almost always runs higher than CPI, typically by around 0.5 to 1.5 percentage points.

What RPI measures and how it is calculated

RPI covers a basket of goods and services representing the spending of most UK households. It includes housing costs, specifically mortgage interest payments and council tax, which CPI excludes. This is one of the main reasons RPI tends to run higher than CPI: when mortgage costs are rising, as they were from 2022 to 2024, RPI rises faster than CPI. When mortgage costs are falling, the gap can narrow.

The formula used to aggregate price changes is also different. RPI uses the arithmetic mean of price relatives, while CPI uses the geometric mean. This technical distinction, sometimes called the formula effect, means RPI will almost always be higher than CPI for the same underlying price changes, even if the basket were identical. The ONS estimates the formula effect alone accounts for around 0.5 to 1 percentage point of the typical gap between the two measures.

What CPI measures and why it became the main inflation target

CPI is the measure used by the Bank of England as its 2 percent inflation target. It is also the measure used in the UK's national accounts and is directly comparable to inflation measures across European Union countries. CPI excludes housing costs and uses the geometric mean formula, which the ONS and most international statistical bodies consider more statistically sound for measuring consumer price changes.

The UK switched from targeting RPI to targeting CPI in 2003. The Bank of England now sets interest rates with reference to CPI, not RPI. When the Bank of England says inflation is at or above target, it means CPI inflation.

Where RPI still matters

RPI was officially classified as a flawed measure by the UK Statistics Authority in 2013 and lost its designation as a national statistic. Despite this, it continues to be used in a significant number of index-linked contracts because changing those contracts would require legislative or contractual renegotiation.

The areas where RPI is still used include rail fare increases, which are set with reference to RPI; some regulated utility prices; older index-linked gilts issued before 2030; and historic student loan interest calculations for pre-2012 loans. Pension increases for many private sector defined benefit schemes are also linked to RPI, though there is ongoing pressure to move these to CPI-linked calculations. The practical effect is that anyone whose income, rent, or contract is linked to RPI will typically see higher increases than those linked to CPI.

CPIH: the third measure

There is a third measure, CPIH, which is CPI extended to include owner-occupier housing costs using a rental equivalence approach rather than mortgage interest. The ONS regards CPIH as its preferred measure because it captures housing costs without the volatility introduced by mortgage rate changes. CPIH sits between CPI and RPI in most conditions. It has not replaced either in common usage but is increasingly cited in official publications alongside CPI.

The distinction between RPI and CPI matters most during periods of rapidly changing mortgage costs, exactly the period the UK has been through since 2022. The Briefed daily briefing covers each ONS inflation release and explains which measure is moving and why. For the broader inflation picture, see our note on the UK inflation forecast for 2026. Free, weekdays at 6:45am.