CPI or RPI: Which Inflation Measure Applies to You

Inflation is the rate at which prices are rising, and the UK publishes more than one measure of it. The one that matters most to most people is the Consumer Prices Index, or CPI. CPI inflation was 3.1% in the 12 months to August 2026, up from 2.9% in July¹. The Consumer Prices Index including owner occupiers' housing costs, or CPIH, was 3.3% over the same period¹. The Retail Prices Index, or RPI, was 3.4%¹.

Which measure applies to you depends on what you hold. CPI is used for the Bank of England's 2% inflation target, for uprating state pensions and benefits, and for the interest on some student loans². RPI still sets the interest on Plan 2 student loans for lower earners, the index-linking on older NS&I savings certificates, and some pension increases⁴. RPI is no longer an accredited official statistic, and its methods will be brought into line with CPIH from 2030 at the earliest¹.

How inflation is measured: the ONS basket compared with a year earlier

The Office for National Statistics compiles the UK's inflation figures by tracking the prices of a representative basket of goods and services. The basket contains approximately 760 items, reviewed annually, and prices are collected from around 20,000 outlets across the UK⁸. Around 160 items are collected centrally rather than by field staff⁸. The ONS describes the basket as covering "over 700 items ranging from food to rents"⁹.

Each month, the ONS compares the total cost of the basket with what it cost a year earlier. That percentage change is the annual inflation rate. It also publishes a monthly rate, which compares this month's prices with last month's. In August 2026, CPI rose by 0.5% on the month, compared with a rise of 0.3% in August 2025¹.

The three main measures differ in how they are calculated and what they include. CPIH and CPI use predominantly the geometric mean to aggregate prices at the elementary level, while RPI uses arithmetic means⁸. CPIH and CPI cover the expenditure of all private households, institutional households and visitors to the UK⁸. RPI has a narrower coverage and uses different methods.

The ONS collects most prices at a set point in time, usually the second or third Tuesday of each month⁸. Publication follows four or five weeks later, and the ONS notes that publication "has never been delayed or missed"⁸. The figures are published monthly, and the ONS gives advance notice of between 18 and 30 months for its publication schedule⁸.

CPI inflation: 3.1% in August

CPI inflation was 3.1% in the 12 months to August 2026, up from 2.9% the previous month¹. On a monthly basis, CPI rose by 0.5% in August 2026, compared with a rise of 0.3% in August 2025¹. The CPI index stood at 143.6 on a 2015 equals 100 basis¹.

Core CPI, which excludes energy, food, alcohol and tobacco, rose by 2.6% in the 12 months to August 2026, unchanged from the previous month¹. Goods inflation was 2.7% over the same period¹. Food and non-alcoholic beverage inflation was 1.3%, unchanged from July¹.

The August 2026 figure was the second consecutive monthly rise. CPI inflation had fallen to 2.6% in June 2026, down from 2.8% in May, before rising to 2.9% in July and 3.1% in August². The Bank of England's explainer notes that inflation "reached 3.1% in August 2026"².

The UK's CPI inflation rate of 3.1% was higher than the first flash estimates for France (2.7%) and Germany (2.9%) in August 2026¹. In June 2026, the UK rate of 2.6% was lower than the EU rate of 2.9% but higher than France (2.0%) and Germany (2.4%)¹.

CPI, CPIH and RPI: how the three measures differ

The three measures are built differently and are used for different purposes. CPIH is the ONS's lead measure of inflation, based on economic principles⁶. It includes owner occupiers' housing costs and Council Tax, which are excluded from CPI⁸. CPIH uses an approach called rental equivalence to measure owner occupiers' housing costs⁸. The official CPIH series started in 2013, though the CPIH series began in January 2006⁸.

CPI is the measure used by the government for inflation targeting and for uprating state pensions and benefits⁸. It was first published in 1997 as the Harmonised Index of Consumer Prices⁸. CPI and CPIH are both accredited official statistics. RPI is not⁸.

RPI provides estimates of inflation from 1947 onwards, with the first official release of consumer price inflation produced in January 1956⁸. It does not meet the required standard for designation as an accredited official statistic¹. The ONS states that "the Retail Prices Index (RPI) and its subcomponents do not meet the required standard for designation as accredited official statistics"¹.

The ONS notes that RPI is typically 0.8 percentage points higher than CPIH⁵. This gap reflects differences in method and coverage, not a difference in the underlying prices.

RPI will adopt CPIH methods, but not before the end of the decade

Following a consultation in 2020, the ONS confirmed that CPIH methods and data sources will be introduced into RPI from 2030 at the earliest⁶. At that point, the supplementary and lower-level indices of RPI will be discontinued⁶. The reform will bring RPI into line with CPIH, which the ONS describes as "the UK's official CPIH rate by 2030"⁵.

Until then, RPI continues to be published and continues to be used for the purposes it currently serves. The reform matters because RPI is typically higher than CPI, so any switch from RPI to CPI reduces the rate at which a payment or charge rises. The Pensions Policy Institute noted that from April 2011, payments from state benefits, public sector pensions and the State Second Pension would be indexed to CPI increases rather than RPI increases¹¹. The government estimated the saving from this switch at £5.2 billion by 2015-16¹².

For anyone with a payment or charge linked to RPI, the reform date is the one to watch. The change will not happen before 2030, and the ONS has said it will give advance notice of between 18 and 30 months for its publication schedule⁸.

Recent inflation: from 3.3% down to 2.6% and back up

Inflation has moved sharply over the past four years. CPI inflation peaked at 11.1% in October 2022, the highest rate for 41 years⁷. The ONS estimates this was the highest rate since 1981¹⁴. It then fell back, reaching the Bank of England's 2% target by June 2024¹⁵.

The rate fell to a low of 1.7% in September 2024, then rose to a post-election peak of 3.8% in July, August and September 2025, before falling back slightly to 3.6% in October 2025¹⁶. It was 3.3% in March 2026, then 2.8% in April, 2.8% in May, 2.6% in June, 2.9% in July and 3.1% in August².

The June 2026 fall was driven by a drop in petrol and diesel prices after a temporary ceasefire in the Middle East². The July and August rises reflected the energy price cap increase in July 2026, with feed-through into wider inflation expected later in the year¹⁷. The ONS reported that transport, particularly motor fuels, was the largest upward contribution to the August 2026 figure¹⁸.

Core CPI, which strips out energy, food, alcohol and tobacco, was 2.6% in the 12 months to August 2026, unchanged from July¹. Services inflation eased from 3.7% to 3.6%¹⁹. Goods inflation slowed from 2.0% to 1.7%¹⁹.

Inflation eats into savings and investment returns

Inflation reduces what your money buys. If your savings pay less than the inflation rate, your balance may grow in cash terms while its purchasing power falls. The Association of Investment Companies notes that "interest rates often fail to keep pace with inflation, meaning that your cash is losing its purchasing power"²⁰.

The real return on a savings account or investment is the return you get minus the inflation rate. If you earn 8% and inflation is 5%, your real return is only 3%²¹. If you earn 2% and inflation is 3.1%, your real return is negative. The AIC gives an example of return on investment: if you invest £1,000 into an asset and the value grows to £1,200 after one year, your ROI is 20% for that year²¹.

Some savings products are directly linked to inflation. NS&I Index-linked Savings Certificates were linked to RPI before 1 May 2019 and to CPI thereafter⁴. If you renew Certificates that mature, your index-linking will be calculated using CPI instead of RPI⁵. A three-year Index-linked Savings Certificate with a £1,000 investment and a CPI January 2019 rate of 1.8% would have returned £1,055.29 in index-linking plus 0.01%⁵.

For pensions, the index used matters. Public sector pensions have been indexed to CPI rather than RPI since April 2011¹¹. The Pension Protection Fund rises payments in line with CPI up to 2.5% for service accrued after 6 April 1997¹⁹. The Pensions Policy Institute has examined how CPI indexation affects pension income²².

Where rising prices are hitting households now

The headline CPI figure is an average. Different households experience inflation differently, depending on what they spend their money on. The ONS publishes Household Costs Indices, or HCIs, which track the inflation rates experienced by different household groups²³.

In the year to June 2026, the gap between the HCI and CPI annual inflation rates was 0.2 percentage points for all households²³. Over the past five years to June 2026, non-retired households and households with children saw a cumulative HCI inflation rate of 33.2%, higher than retired households²³.

Housing costs are a major driver of the difference. In March 2025, housing contributed 0.83 percentage points more to the all-households HCI annual rate than to CPI²⁴. In March 2024, housing and household services contributed 1.30 percentage points more to the all-household HCI rate²⁵. Council Tax is not included in CPI but contributed 0.21 percentage points to the HCI annual rate in June 2026²³.

Private renters have faced higher inflation than other groups. In the year to June 2024, private renters' HCI inflation rate was 3.2%, higher than social and other renters²⁶. Low-income households have also faced higher rates: in the year to October 2022, low-income households faced an HCI inflation rate 2.0 percentage points higher than high-income households²⁷.

The Scottish Government has noted that food and non-alcoholic drink inflation rose from 2% at the end of 2024 to 5.1% in August 2025¹⁷. The cost of living crisis has affected different parts of the UK differently, with the Scottish Government publishing analysis of its impact in Scotland¹³.

What causes inflation to rise?

Inflation rises when the prices of goods and services increase across the economy. Common drivers include higher energy costs, rising wages, supply chain disruption, and strong consumer demand. The ONS reported that transport, particularly motor fuels, was the largest upward contribution to the August 2026 CPI figure¹⁸. The energy price cap was raised in July 2026, with feed-through into wider inflation expected later in the year¹⁷.

The Bank of England sets interest rates to keep inflation near its 2% target². When inflation is high, the Bank may raise interest rates to reduce spending and bring prices down. When inflation is low, it may cut rates. The Bank held the base rate at 3.75% in September 2026, despite CPI inflation rising to 3.1% in August²⁹.

The government also uses inflation figures to set increases in benefits, pensions and tax thresholds. The state pension is uprated using September's CPI figure and the three-month average of earnings from July³⁰. The Universal Credit Act 2025 defines the CPI uprating formula as "the percentage by which the consumer prices index for the September before the start of the tax year is higher than it was for the September before that"³¹.

Some payments are linked to RPI rather than CPI. Plan 2 student loan borrowers earning £25,000 or less were charged interest at the RPI rate³². Plan 3 student loans charge RPI plus 3% while studying and throughout repayment, except where the PMR cap is below RPI³². Plan 5 loans use CPI³³.

Is inflation a form of tax?

Inflation is not a tax. It is a measure of how fast the prices of goods and services are rising or falling³⁴. No one collects it and no one receives it. But it can feel like a tax because it reduces what your money buys, and it hits households on lower incomes harder because they spend a larger share of their income on essentials.

The claim that "inflation is a tax" has been made by politicians. Rishi Sunak said in October 2023: "Inflation is a tax, it is a tax that impacts the poorest people the most"³⁴. Full Fact, the independent fact-checking organisation, states that "inflation is not a form of taxation"³⁴.

The distributional effect is real. The Resolution Foundation has noted that expected inflation for 2025-26 was 3.2%²⁵. The Institute for Fiscal Studies has examined how inflation affects different income groups. The ONS Household Costs Indices show that low-income households faced an HCI inflation rate 2.0 percentage points higher than high-income households in the year to October 2022²⁷.

For anyone trying to work out the effect on their own finances, the key calculation is the real return: the return you get minus the inflation rate. If your income rises by less than inflation, your real income falls. The Joseph Rowntree Foundation found that real earnings fell by 3% in the financial year 2022/23 when compared with CPI³⁵.

Why is a moderate level of inflation considered healthy?

The Bank of England targets 2% CPI inflation². A small amount of inflation is considered healthy because it encourages spending rather than hoarding cash, allows wages and prices to adjust, and gives the Bank room to cut interest rates in a downturn. Very low inflation or falling prices can lead households to delay spending, which slows the economy further.

The 2% target is not a ceiling or a floor. Inflation can be above or below it for periods. The Bank of England's explainer notes that inflation was 3.3% in March 2026, then 2.8% in April, 2.8% in May, 2.6% in June, 2.9% in July and 3.1% in August². The Bank held the base rate at 3.75% in September 2026²⁹.

The Financial Conduct Authority requires firms to use CPI as a measure of the current inflation rate for cash warnings and fixed-term product warnings³⁶. This is because CPI is the headline measure and the one the government uses for its target.

For consumers, the practical effect of moderate inflation is that money held in cash loses value slowly over time. The AIC notes that interest rates often fail to keep pace with inflation²⁰. The Pensions Policy Institute has examined how CPI indexation affects pension income over time²².

How do I work out the real return on my savings or investments?

The real return is the return you get minus the inflation rate. If your savings account pays 8% and inflation is 5%, your real return is only 3%²¹. If your savings account pays 2% and inflation is 3.1%, your real return is negative: your money is losing purchasing power even though the balance is growing.

The AIC gives an example of return on investment: if you invest £1,000 into an asset and the value grows to £1,200 after one year, your ROI is 20% for that year²¹. To work out the real return, subtract the inflation rate from that 20%.

For pensions, the index used for increases matters. The Pension Protection Fund rises payments in line with CPI up to 2.5% for service accrued after 6 April 1997¹⁹. Public sector pensions have been indexed to CPI rather than RPI since April 2011¹¹. The Pensions Policy Institute has examined how CPI indexation affects pension income²².

Some savings products are directly linked to inflation. NS&I Index-linked Savings Certificates were linked to RPI before 1 May 2019 and to CPI thereafter⁴. If you renew Certificates that mature, your index-linking will be calculated using CPI instead of RPI⁵. A three-year Index-linked Savings Certificate with a £1,000 investment and a CPI January 2019 rate of 1.8% would have returned £1,055.29 in index-linking plus 0.01%⁵.

What is the highest UK inflation rate on record in recent decades?

CPI inflation peaked at 11.1% in October 2022, the highest rate for 41 years⁷. The ONS estimates this was the highest rate since 1981¹⁴. The Scottish Government noted that "the rate of inflation within the UK reached its highest rate for 41 years"¹³.

The peak was driven by energy prices, food costs and supply chain disruption following the pandemic and the war in Ukraine. CPI inflation then fell back, reaching the Bank of England's 2% target by June 2024¹⁵. It fell to a low of 1.7% in September 2024, then rose to a post-election peak of 3.8% in July, August and September 2025, before falling back slightly to 3.6% in October 2025¹⁶.

The most recent figure is 3.1% in the 12 months to August 2026¹. The Bank of England held the base rate at 3.75% in September 2026²⁹. The ONS gives advance notice of between 18 and 30 months for its publication schedule⁸.