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RPI |
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Given these theoretical justifications for the predictive power of asset prices in relation to consumer price inflation, it is only to be expected that an intensive debate would rage about the need to reflect this wisdom in monetary policy-making The conventional measures, CPI, WPI, or the retail price index, does include asset prices directly, but are, as argued, affected anyhow by those prices, even if with a lag. In 1979, the newly elected government of Margaret Thatcher discreetly reformed the long-established basic state pension, which was increased each year in line with the higher of two indices: the retail price index or the average earnings index. The retail price index (RPI), which did not suffer from any measurement inconsistency, was firmly in the negative territory in the past five years prior to 2003. |
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