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CPI vs RPI inflation: what is the difference between ONS measures?
The Office for National Statistics calculates CPI, RPI and CPIH each month. What are they and what do they reveal about UK inflation?
Inflation in the UK is typically measured through the Consumer Prices Index (CPI), with new data released by the Office for National Statistics (ONS) every month.
CPI is the metric used for the Bank of England’s official inflation target but there are other ways price growth can be calculated.
For example, the UK used the Retail Prices Index (RPI) to measure inflation before it switched to CPI, while some experts say CPIH (which includes housing costs) is a better way to measure inflation.
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The Consumer Prices Index is the UK’s official measure of inflation. It tells you how much the cost of goods and services have increased over the past year based on a representative basket of household items.
A new report is published by the ONS each month, which MoneyWeek reports on. Our calendar of CPI release dates tells you when you can expect the next figures.
CPI is recognised internationally as a statistic. This means the UK’s figures are closely comparable with those of other nations, even though its economy works in a different way.
To measure CPI each month, the ONS looks at around 180,000 prices across almost 750 typical goods and services to see how prices have changed. This shopping basket is reviewed each year to ensure the statistic keeps up with people's evolving spending habits.
The 2026 review reflected the latest trends in food, fashion and technology, with items such as houmous and alcohol-free beer joining the club. Old favourites like premium bottled lager were thrown out.
While this basket gives a national inflation figure, the exact impact varies from household to household. For example, pensioners are likely to spend more on energy than young working professionals.
As well as showing you how much your bills and purchases have gone up or down in price over the past year, CPI is also used when the government and other bodies are writing policy.
The level of inflation, measured by CPI, plays a key role in setting the state pension and other benefits like Universal Credit, public sector pensions and statutory sick pay each year.
The headline CPI figure does not give you the full picture. Instead, it should be viewed as more of a broad sweep. The underlying data is often more insightful.
For example, the Bank of England also looks at both core inflation and services inflation when setting interest rates.
Core inflation strips out categories that tend to see short, sharp fluctuations in prices, like food and energy.
Meanwhile, services inflation covers things like hotel stays, airfares, educational costs and more. As services make up around 80% of the UK economy, the level of services inflation is particularly important when making policy decisions.
What is RPI inflation?
The Retail Prices Index is another index used to measure changing prices. RPI tends to track higher than CPI because it includes costs associated with home ownership and due to the way it calculates the weighting of items in its basket.
RPI was the UK’s first official measure of inflation, and was first measured in 1956.
Given its age, RPI can give us a sense of how prices have changed since the 1950s, but CPI replaced RPI as the UK’s official measure in 2003. The Bank of England’s 2% target relates to CPI.
Where RPI does still have relevance is when it comes to setting cost increases for some bills and services in the economy.
For example, July’s RPI data is traditionally used by the government to set annual rail ticket price increases. It is also used to set levies like road tax.
Here are some of the other things RPI sets or influences:
CPIH is another measure calculated by the ONS. It stands for the Consumer Prices Index including owner occupiers’ housing costs.
CPIH is similar to CPI, but includes the costs of owning, maintaining and living in a home. This means it also shares characteristics with RPI.
CPIH is the ONS's best measure of UK inflation because it captures more of the economy than the other two measures. However, given the UK housing system is different to that of any other nation, it is not internationally comparable.
What does high inflation mean?
High inflation means costs are rising at a rapid rate, making your money worth less in real terms.
In recent years, the UK has struggled with high inflation, as price growth has remained above 2% for almost every month since late 2021, with the worst of this happening during the 2022 cost of living crisis.
When inflation is high, it is important that you make sure your earnings and savings are keeping up. You should aim to get a pay rise each year that is at least the level of inflation as anything below this means you will be earning less in real terms.
As for your savings, you should keep your cash in a savings account that pays an interest rate higher than the current rate of inflation to make sure it actually grows in real terms.
If you already have an emergency savings fund, putting some money into a diversified portfolio of investments (such as a global stock market tracker) can be a good long-term strategy for trying to beat inflation. Investments typically outperform cash over the long run, but a minimum horizon of five years is generally recommended.
Low inflation means prices are rising at a slower rate than they once were, but that they are still rising. This is known as disinflation.
Meanwhile, deflation means prices are falling.
If sustained for a long period, low inflation and deflation can indicate a weaker economy, with deflation likely to be particularly bad for GDP growth.
If inflation is lower than the 2% target, most economists believe spending will generally decrease. With wages likely to outpace the rate of price rises, consumers are more likely to be incentivised to hold onto their disposable income, which means less money will move around the economy and the government's tax revenues will fall.
In a deflationary scenario, these effects are likely to be turbo-charged. After all, why spend your money now if what you are buying could be cheaper next week?
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