40 Year Record Inflation RPI Hits 9.0%pa and CPI 7.0%pa

Published / Last Updated on 20/04/2022

Last week, the Office for National Statistics (ONS) released UK inflation figures for March 2022. This followed record inflation figures in the USA at 8.5%pa for March.

Consumer Prices Index (CPI) has hit yet a record 40 year high at 7.0%pa in March 2022 (6.2%pa in February, 5.5%pa in January, 5.4%pa in December, 5.1%pa in November and 4.2%pa in October).  This is its highest rate in over 40 years.

The ONS put the inflationary increases price increases down to:

  • Transport and energy, as Ukraine and Russian energy restrictions continue to bite
  • Recreation and culture
  • Housing, water, electricity, gas and other fuels
  • Furniture and household goods
  • Household textiles, major appliances, and tools and equipment for house and garden

On the downside, virtually nothing is putting downward pressure on inflation at present.

What about the old inflation measure of the Retail Prices Index (RPI)?

The old measure of inflation RPI, which is an arithmetical mean of the average prices of a basket of household spending, also hit yet a staggering 40 year high in March of 9.0%pa (up from 8.2% in February, 7.8% in January, 7.5% in December, 7.1%pa in November and 6.0%pa in October).  The last time RPI was at these levels was in the 1980s and we are likely moving to break that record the Bank of England suggesting it could 10% without more intervention.

We repeat our message on inflation in that we still believe that RPI is a more accurate measure as it is the costs of a standard amount of a set of goods and services divided by the number of goods and services called an arithmetical mean whereas the newer measure of inflation, CPI is a geometrical mean i.e., prices multiplied together and then the nth root of the same number of goods and services.

The Bank of England’s next move?  We expected yet another 0.25%pa interest rate increase in March to 0.75%pa, and we got it.  We expect a further two or three rises by the end of 2022 and suggest rates could be back to 2.0% in 2023 and 3.0% in 2024.

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