CPI vs RPI inflation: what is the difference between ONS measures?

Inflation, as measured by the Consumer Prices Index (CPI), slowed to 3.6% in October, its lowest level in five months."

Inflation has been rising steadily since the start of 2025, and is still over the Bank of England’s 2% target.

However, it has slowed significantly from record highs in 2022, in part caused by soaring global demand for goods and high energy and fuel prices.

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The Bank of England’s latest Monetary Policy Report, published in November, believes CPI inflation peaked at 3.8% in August and September and predicts it will slow to 3.2% by March 2026, eventually reaching 2% by the end of 2027.

But if you haven’t heard of CPI before, you might have wondered what it actually means. Maybe you have seen the Retail Prices Index (RPI) bandied about, or even the Consumer Prices Index including owner occupiers’ housing costs (CPIH).

We take a closer look at all three indices used to measure inflation, what each one tells you and which matters most for your finances.

What is CPI inflation?

The Consumer Prices Index is the official measure of inflation. It tells you how much the cost of goods and services has increased over the past year based on a representative basket of household items.

A new report is published each month. MoneyWeek’s 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 2025 review reflected the latest trends in food, fashion and technology, with items such as pulled pork, men’s sliders and VR headsets joining the club. Old favourites like oven-ready gammon joints have been thrown out.

While this basket gives us 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.

You can see what your personal inflation rate is by using the inflation calculator from the ONS.

From state pension to benefits, how is CPI used?

As well as showing you how much your bills and purchases have gone up or down in price over the past year, CPI has a real-world impact on some day-to-day costs. It plays a key role in setting the state pension and other benefits like Universal Credit, public sector pensions and statutory sick pay.

Another thing to note with CPI is that the headline 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 core inflation and services inflation when setting interest rates. These two measures of inflation are running at 3.4% and 4.5% respectively, (October 2025, published in November).

Core inflation strips out categories that tend to see short, sharp fluctuations in prices, like food and energy. Services inflation covers things like hotel stays, airfares, educational costs and more. Services make up around 80% of the UK economy, so this is an important measure.

What is RPI inflation?

The Retail Prices Index is another index used to measure changing prices. It came in at 4.3% in the latest report covering October 2025. RPI tends to track higher than CPI because it includes costs associated with home ownership.

Originally, RPI was the UK’s official inflation statistic. It was first implemented in 1956. “Until the introduction of the UK CPI […] in 1996, the RPI and its derivatives were the only measures of UK consumer price inflation available to users,” the ONS says.

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. For example, July’s reading is 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:

• Tobacco duty
• Air passenger duty
• Alcohol duty
• Final salary pension payments
• Interest on student loans
• Income from index-linked annuities

What is CPIH inflation?

CPIH is another measure calculated by the ONS. It stands for the Consumer Prices Index including owner occupiers’ housing costs. It came in at 3.8% in October.

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 given 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. Unless your money keeps up (for example, in an inflation-busting savings account or through wage increases) the value of your cash will be eroded over time.

Imagine your savings are earning a low rate like 2% interest and inflation is 3.6% (October’s figure). That means your savings are being eroded at a rate of 1.6% in real terms. Similarly, if you get a 5% pay rise and inflation is 3.6%, your real wage increase is more like 1.4%.

Most western economists agree that having a manageable rate of inflation is not a bad thing. The problem in recent years has been price increases getting out of control.

The Bank of England has a target to keep inflation at 2% – a level it believes allows for a good level of spending that will boost economic growth. The reason is that if prices are going up in the near future, you might as well complete a purchase today.

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.

We take a closer look in our guide on saving versus investing.

What is the impact of low inflation?

Low inflation means prices are rising at a slow rate, but that they are still rising. 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 comes in below the Bank of England’s 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? Deflation is different from disinflation, which is when prices are still rising but at a slower rate than they once were.