Inflation: CPIH v RPI

TheGreenFrog

One interesting statistic from this morning's inflation announcement (particularly for those interested in inflation-linked gilts) is the RPI figure.  This came in at 3.6%, whereas the CPIH figure was 3.9%.  RPI usually higher and sometimes much more so (eg March 2023 13% v 9%)

SnowMan

Likely due to the different treatment of housing costs for home-owners. 

The RPI uses a combination of mortgage interest payments and also house prices as a proxy for housing depreciation.

CPIH allows for housing costs through an estimate of the equivalent rents that owner-occupiers would be paying.

Hence reducing mortgage interest payments will reduce the overall increase in RPI but not CPIH.

Hence reducing mortgage interest payments following the cut in base rate in November presumably explains this as this is reflected in RPI but not CPIH.

SnowMan

From the bulletin it seems to be more to do with the high housing costs element in CPIH inflation rather than the low housing costs element in RPI.

RPIX (which is the version of RPI with mortgage interest stripped out) is 3.2% vs 3% for RPI and CPIH is 3.9% vs CPI of 3% for January.

https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/january2025#latest-movements-in-cpih-inflation

The owner occupiers' housing costs (OOH) component of CPIH rose by 8.0% in the 12 months to January 2025, unchanged from the 12 months to December 2024. This is the joint-highest annual rate since February 1992 in the constructed historical series.

LHW99

Lies, d@mned lies & statistics........