Inflation in the UK - Inflation Indices

There are two main indexes of inflation that are used in the UK, with the inflation rate to be calculated. These are the consumer prices (CPI) and the retail prices index (RPI). Both are indexes by a wide range of goods and services calculated and out have changed as the cost of these goods and services over a given period.

The CPI and RPI to monitor the prices of some other goods and services, and their results are used for differentPurposes. The CPI is a measure of the British Government, which sets out the Bank of England a target to ensure that no cost of living rise or fall dramatically, so the economy can actually grow. The CPI is also used to compare the rate of the United Kingdom with inflation, which in other countries.

The RPI, on the other hand, is used by the government when considering increasing pensions and benefits and is often also as a benchmark in wage or privateContract negotiations.

One of the main problems with the current indexes of inflation in Britain is that they are based on the average expenditure. Individuals will have different spending patterns and, therefore, be affected by inflation in very different ways.

The current indexes, for example, does not take into account the experience of high net worth individuals, since they are liable to different consumption patterns from the average,Householder.

Suitable high net worth individuals have a much lower share of their income on some basic goods such as food and drink spend than the average household, but a greater share of their income on luxury items such as holidays, club memberships, jewelry, luxury cars and private school fees.

According to private bankers, Coutts, the inflation rate on luxury goods and services between November 2006 and November 2007 was 9.5%, which was 7.4% higherthan the CPI during this period. The Bank has a new index as the Coutts Wealth Inflation Index, which is destined to the inflation rate for the types of products and services to calculate, buy, high-net worth individuals is likely to be known, launched.

With the growing number of high net worth individuals, both in the UK and around the world, this new index raises questions about just how relevant the accuracy and CPI and RPI are.