# UK Inflation: How It Is Measured and What It Means for You

> CPI and RPI are both measures of inflation but they differ significantly. Here is how inflation is calculated, what drives it and how it affects your finances.

*Section: News — By Marcus Vale (Business & Markets Editor) — Published October 3, 2025 — 1 min read*

Canonical URL: https://dailyjunction.org/news/uk-inflation-how-measured-what-means
Tags: inflation, cpi, rpi, uk economy, cost of living

## Key takeaways

- CPI (Consumer Prices Index) is the official UK inflation target measure
- RPI is higher than CPI and used for index-linking rail fares and some benefits
- Energy and food have been the largest contributors to recent UK inflation
- The Bank of England targets 2% CPI; above this, the Bank may raise interest rates

## How inflation is measured

Every month, the Office for National Statistics collects around 180,000 prices from thousands of shops and online retailers for a basket of goods and services that represents typical household spending. The change in the cost of this basket over the previous year is the Consumer Prices Index (CPI).

## CPI versus RPI

The Retail Prices Index is an older measure that differs from CPI in both its coverage and methodology. RPI includes housing costs including mortgage interest payments; CPI does not. The methodology also differs: RPI uses an arithmetic mean; CPI uses a geometric mean. RPI is almost always higher than CPI as a result. Despite being considered a less accurate measure, RPI is used to set rail fare increases and some government savings products.

## What drives inflation

Inflation is driven by demand (spending outpacing productive capacity), supply shocks (energy price spikes, supply chain disruptions) and expectations. The Bank of England's inflation target is 2% CPI; persistent deviation above this typically leads to interest rate increases.

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## Sources

- [Reuters](https://www.reuters.com)
- [Associated Press](https://apnews.com)
- [BBC News](https://www.bbc.co.uk/news)

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