Please :- what is the current headline rate of inflation??? and what is the current underlying rate of inflation???

Most recent headline measure - CPI (Ex HICP) 1.4% Previous headline measure - RPIX 2.4% Previous to previous headline measure - RPI 1.5%

Sorry to be really useless.

but i could do with the headline rate of inflation , as my buiseness less is due for its 5 yearly rent increase , it increases by the rate of inflation.........which one would be used ???

Usually RPI, which Daytona seems to have misquoted!

I haven't seen an explanation anywhere for the name change, did they think hiccup wasn't serious enough?

That should be 2.6%! And set to rise as interest rates go up - I suspect the treasury are hoping that wage bargaining will look at CPI and not RPI ...

Stephen thank you for your reply , what is cpi ?

Another quick question , will the rate of inflation go up say .25% if the bank base rate goes up .25%??

CPI is the the European method of calculating inflation. The main difference to RPI & RPIX is that it totally ignores housing costs.

Which IMO makes it a pretty useless measure as everyone has housing costs and they are major portion of most peoples' expenditure. So the ridiculous council tax rises we've seen won't be included in CPI, but they will be included in RPI & RPIX.

Consumer Price Index. It's broadly similar to the older RPIX (Retail Price Index eXcluding mortgage payments) but is calculated on a basis which is uniform across the EU. In general it's known as HICP (Harmonised Index of Consumer Prices), but for some reason GB has seen fit to rename it for UK use. In general HICP tends to come out about 0.5% below RPIX due to differing calculation methods, hence the inflation target has been lowered to 2% from 2.5%. Of course, if that can be used to persuade people that inflation is "really" 0.5% lower they might settle for lower wage increases etc (or not). For now at least things which are officially linked to inflation (pensions, index-linked gilts, benefits etc) will continue to follow RPI, which includes mortgage payments and hence will rise as interest rates rise.

Not directly, in fact the reason for putting interest rates up is to *stop* inflation rising above the target level. However, the RPI measure does include mortgage payments so it gets pulled up to some extent as mortgage rates rise and vice versa.

"Andy Pandy" wrote in message news:GHi1c.14629$ snipped-for-privacy@stones.force.net...

I think there are plans to include housing costs in HICP, although of course for most of Europe (and quite a bit of the UK these days) it's rents that count rather than mortgage payments. However, I don't see it as particularly obvious that council tax should be included, at least in any direct way. Councils would presumably claim that we are getting more for our money; if you start taking two holidays rather than one per year you wouldn't say that holiday inflation is 100%! For a true measure you would have to normalise by the value of whatever is being provided by the councils, but in practice that would be pretty hard to do.

Yeah, right. Have you seen improvements in the services you get from your council which are in line with the council tax rise? I haven't, if anything services have been cut. The main excuses our council gave for the 12.9% rise last year were - the NI rise, the pension fund deficit for council employees, and public sector pay settlements not being fully funded by the government. None of this leads to improved services.

Thta's true from the point of view that council tax is not a housing cost, but a form of taxation like any other. The fact that it happens to be linked to house value, while income tax rate is linked to earnings, and VAT is linked to spending, is neither here nor there.

So it's right that CT should not form part of the housing costs element of the measure of inflation, but nevertheless I feel there is an argument that taxes (all taxes) should be included in the measure of inflation in their own right. After all, they are part of the real cost of living.

Well, the problem is that you're using the inflation measure for different purposes. If you're looking at indexation of pensions or social security benefits then council tax is relevant because people have no choice about paying it, as you say it's part of the cost of living just as much as milk or bread. OTOH from an economic view, e.g. for the BOE to target when it sets interest rates, what counts is the average value of money, i.e. what you can buy now with a pound compared with ten years ago. For that kind of use taxes are not relevant, only the prices of things which are bought with them - and that's often hard to judge if there is no market, e.g. is more spending on the NHS indicative of inflation in health costs or the purchase of more health care?

The Bank of England may respond to an increase in the inflation rate by increasing interest rates. The hope would be that increasing the interest rate would cause inflation to fall.

unless they are entitled to council tax benefit, in which case, it is totally irrelevant when considering any other benefit available.

Yes, but Council services are also "bought", albeit compulsorily, and so Council Tax needs to be taken into account even for non-pensioners.

Also, presumably, the cost of "normal" stuff is taken to be the cash price the buyer pays, and therefore automatically takes in VAT.

Again, it's indicative of a hole being created in people's disposable income, because they can't opt out of paying for the increased spending, whether it's as a result of more care or more expensive care. I guess it boils down to weighting. It's all very well to have a huge vector of inflation, detailing inflation for thousands of different things, a loaf of bread, a pint of beer, a pound of mutton, a one mile taxi ride, etc, but nobody eats mutton any more (it's all lamb now), and we shun beer and taxis for apple juice and pushbikes (well, it *could* happen), and if we take two ski-ing holidays per annum now instead of just a half ten years ago, then the weighting of the skiing holiday in the overall scheme of things needs to be amended accordingly, when you work out a notional modulus of the vector. Likewise oter things need to be dealt with, if there are fewer smokers, for example, we need to down-weight tobacco inflation.

I don't quite understand why 2% was chosen as the CPI target. Surely CPI has averaged a lot less than this since its introduction (allowing for simulated table data), and is currently at 1.4% compared with 2.6% for RPIX. Won't this mean the BOE has to 'engineer' an effective 40% rise in current CPI inflation in order to hit their new CPI target?

-Neil F.

As I say, I think the long-run average difference between the two indices is around 0.5%, obviously at any given time it may be more or less. From a practical point of view it would be unpopular to make such a switch at a time when it would imply higher interest rates. The target is actually a band +-1% around the centre point, and I don't think there is any requirement to "average out" deviations, i.e. they could in principle sit permanently 0.8% above the centre point and still be OK. Interest rates are still likely to rise, but perhaps by less than they would have without the switch to the new target. It isn't so much engineering a rise in inflation as being a bit more relaxed about containing it.

"neil f" wrote

Nope, not 40% - just a 0.6% rise! [= 2.0% - 1.4%] ;-)