Why are there different types of inflation rate?
The above rate is called the Retail Price Index (RPI) and includes the cost of mortgage inflation rates. This is a prominent inflation rate that is quoted frequently by the media, so it is also called the headline rate. Another important measurement is the underlying inflation rate, or RPIX. This is RPI minus the cost of mortgage interest rates, so, since mortgage interest rates stem from the rate set by the Bank of England, it is preferred by the government and most experts as a purer measure of the actual trend in prices. A third, less commonly quoted and even purer rate is RPIY – this is RPI minus mortgage interest rates and consumer taxes. What causes inflation? In classical economic terms, it is caused by demand exceeding supply: in other words, too much money is chasing too few goods and services, so they begin to command higher prices. This situation can arise in several ways. Rising public expectations of the standard of living may increase demand; supply may be constricted dur
