Retail Price Index (RPI) explained
By Ken Chigbo, Founder, KenMacro. Published 2026-05-13.
Quick answer
The Retail Price Index, or RPI, is a legacy UK inflation measure published monthly by the Office for National Statistics. It tracks the cost of a basket of goods and services, including mortgage interest and housing depreciation. Although no longer a national statistic, RPI still anchors index-linked gilts, rail fares, and many commercial contracts.
What is retail price index?
The Retail Price Index measures the average change in prices for a representative basket of UK consumer goods and services, including housing costs such as mortgage interest payments and depreciation that the Consumer Prices Index excludes. It was the UK’s headline inflation gauge from 1947 until CPI took over for monetary policy purposes in 2003. The Office for National Statistics lost its National Statistic designation for RPI in 2013 due to methodological flaws, particularly the use of the Carli formula, which tends to overstate inflation relative to CPI. Despite this, RPI persists in legal and contractual frameworks.
How traders use retail price index
The desk treats RPI as a secondary read, but one that still moves specific instruments. Index-linked gilt cash flows, both coupons and redemption values, are uprated by RPI, so the print directly feeds linker pricing and breakeven inflation spreads against conventional gilts. Sterling rates desks watch the RPI-CPI wedge, often running 70 to 100 basis points wider than CPI, because that wedge governs the value of legacy linkers ahead of the planned 2030 reform aligning RPI with CPIH. Retail traders trading GBP crosses use RPI as a cross-check on the official CPI release, published the same morning by the ONS, but price action in cable and gilt futures almost always responds to CPI first. RPI surprises mainly matter when the gap to CPI widens or narrows unexpectedly.
Common misconceptions about the Retail Price Index
Many retail traders assume RPI and CPI measure the same thing with minor tweaks. They do not. RPI uses the Carli arithmetic mean formula for some elementary aggregates, which mathematically biases the index upward, while CPI uses the geometric Jevons formula. RPI also includes owner-occupier housing costs through mortgage interest and depreciation; CPI excludes these entirely. A second misconception is that RPI is obsolete. It is not used by the Bank of England for inflation targeting, but it remains contractually embedded in linkers, rail regulation, student loan interest, and many pension schemes until the 2030 reform takes effect.
Frequently asked
Is RPI still published?
Yes. The Office for National Statistics continues to publish RPI monthly, usually on the same morning as CPI, around the middle of each month at 7am UK time. However, in 2013 the UK Statistics Authority withdrew its designation as a National Statistic because of known methodological flaws. The ONS has confirmed publication will continue until at least 2030, when the index is scheduled to be aligned with CPIH methodology, effectively ending RPI as a distinct measure.
Why is RPI usually higher than CPI?
Two main reasons. First, RPI uses the Carli formula for combining price quotes at the lowest level of aggregation, which introduces an upward bias compared with the Jevons geometric mean used in CPI. Second, RPI includes housing costs such as mortgage interest payments and depreciation, which CPI excludes. The combined effect, often called the formula effect plus housing effect, typically leaves RPI running 70 to 100 basis points above CPI, though the gap varies with mortgage rates.
How does RPI affect index-linked gilts?
Index-linked gilts, or linkers, have their principal and coupon payments uprated by RPI with a lag. A higher RPI print directly increases the cash flows investors receive. This makes linkers a hedge against RPI inflation specifically, not CPI. The 2030 alignment of RPI with CPIH is a known overhang for linker holders, because it effectively reduces future uprating relative to current methodology, which is reflected in breakeven inflation curves traded against conventional gilts.
Should retail forex traders watch RPI?
For cable and EUR/GBP, CPI is the primary release that moves sterling. RPI is published alongside it and rarely drives the initial reaction. However, the desk monitors RPI for two reasons: the RPI-CPI wedge informs gilt market positioning, which feeds into broader sterling sentiment, and certain policy decisions, such as rail fare caps and student loan rates, reference RPI directly. Treat RPI as supporting context rather than a primary catalyst for GBP price action.
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