Retail Price Index (RPI)
The Retail Price Index (RPI) is a measure of inflation that tracks changes in the price of a fixed basket of goods and services commonly purchased by households, including housing costs such as mortgage interest payments. RPI is used to measure the cost of living and is often used for wage negotiations, pension adjustments, and the indexing of certain financial instruments. Although it has been largely replaced by the Consumer Price Index (CPI) in many countries, RPI is still used in some contexts, particularly in the UK.
Example
The RPI for the year shows an increase of 3%, indicating that the average price of goods and services has risen by 3%, impacting wage negotiations and pension adjustments.
Key points
• A measure of inflation that tracks changes in the price of a fixed basket of goods and services.
• Includes housing costs, unlike other inflation measures like CPI.
• Commonly used in the UK for wage negotiations, pension indexing, and certain financial contracts.
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