Should CPI or RPI be your guide?

Milarky

I ask because current savings rates are beginning to be compared with CPI rather than RPI - which has always been used by everyone other than the govt as their 'gold standard'.

The problem with RPI is it's headline sensitivity. So when it topped out at 5% recently we forgot about the very different -%age this time a year ago. CPI, by contrast ranges more narrowly, so at any given time it tends to reflect average price rises over several years rather well.

Of course the reality is that rates yo-yo as well - they don't really follow CPI - which makes RPI comparisons more rational - but with one proviso. That's comparing RPI today with fixed rates of 12 months ago.

Need I spell this out?

The 'rate of inflation' is (by definition) a backward looking measure - the change in the past 12 months. So taking bond rates today (fixed for 1 year) of the order of 3% means you hope that RPI will be no more than 2.4%
in one year's time - notwithstanding that RPI stands at 4.8% today [meaning bond rates of 6% a year ago would have been needed]

Sceptic001

The main difference between RPI and CPI is that RPI includes mortgage interest. That is why inflation as measured by RPI sank into negative territory for much of 2009 and then quickly bounced back above CPI when the sharp mortgage rate falls disappeared from the 12-month headline figure. So the answer to your question would appear to be that if you have a mortgage look at RPI. If you don't have a mortgage CPI seems to be a better match.