RIP old RPI!? Nah, we’ll just stick with the old Retail Price Index formula said the National Statistician on Thursday morning, surprising just about every analyst in our inbox and making holders of index linked gilts pretty darn happy. Yields have fallen by between 22bps and 38bps across maturities at pixel.
The ONS had four options to choose from, moving from ‘no change’ to the RPI through to ‘lots of change’. Each choice would have involved the Carli index, that most prettily named devil, which isn’t used by any other advanced economy’s statistical measures due, primarily, to its large upward bias. But, obviously, it still persists within the RPI where, according to estimates, it was worth nearly a 1 per cent bump in the measure per year. Read more
The Office for National Statistics is out to get the Retail Price Index… or at least the part of responsible for the ‘formula effect gap’. But before we get to the sexy stuff — involving gilts and clauses and all — a quick statistical primer is called for.
The RPI began life as a compensation index, developed as an aid to protect ordinary British workers from price increases associated with WWI. It didn’t become the main domestic measure of inflation until much later. Read more
It’s letter writing time again at Threadneedle Street.
Cue sighs of relief at the Bank of England on Tuesday morning following news UK CPI had fallen to 4 per cent YEAR-ON-YEAR in March from 4.4 per cent YEAR-ON-YEAR in February.
Update: The inflation number’s out — and higher than expected. February saw CPI at 4.4 per cent, RPI at 5.5 per cent, which rates are at highs not seen since 2008 or 1991 year on year, respectively. The ONS said that clothing, energy and housing costs triggered this month’s upward shift.
The wrong kind of leaves on the line; pole-vaulting, eye-gouging inflation in the UK. Sadly, having similar effects these days. Read more
Buried a bit deep in Wednesday’s inflation report from the Bank of England — a little from BoE governor Mervyn King to the UK’s Office for National Statistics (ONS).
The central bank is now claiming that CPI inflation may have been “biased down” between 1997 to 2009, because of a 2010 change in the way the ONS interprets clothing and footwear prices. So basically, the BoE says that measured inflation is now running 0.3 per cent higher than otherwise because of the ONS — convenient for a central bank under the kosh for failing to meet its inflation target (for ages). Read more
Citi is back with another take on low bond yields and pension accounting.
And before you fall asleep (wake up!) this is an update of Citi’s March 2009 note on quantitative easing and exploding pensions. Read more
There’s more letter writing in store for the Bank of England governor Mervyn King, reports FT Alphaville. August consumer price inflation was forecast to come in 2.9 per cent (year-on-year). It didn’t. In fact, it was 3.1 per cent – unchanged from July’s reading – due to unexpectedly strong rises in airfares, clothes and food prices. Month-on-month, inflation jumped by 0.5 per cent, compared to the 0.2 per cent fall seen in July, and against forecasts of a 0.3 per cent increase. Read more
Oh, not more UK inflation-indexing shenanigans.
Courtesy of Barclays Capital, here’s a quick update on the RPI-to-CPI indexation imbroglio that’s broken out in the UK linker market lately. Read more
July inflation data for the UK is in, and surprise, surprise: CPI is above 3 per cent — again — and Bank of England Governor Mervyn King has to write a letter to the Chancellor, George Osborne. Again. But is CPI starting to soften up, asks FT Alphaville? Read more
Is Britain’s government quietly working on a(nother) CPI/RPI change?
Back in May, the new UK chancellor George Osborne suggested to Mervyn King that he would “welcome” the Bank of England governor’s views “on how we might accelerate the process of including housing costs in the [Consumer Prices Index] inflation target.” Read more
As part of its emergency Budget, the UK government wants to switch public sector pension pay-outs from being based on the Retail Prices Index (RPI), to the Consumer Prices Index (CPI). CPI has generally been lower than its RPI-cousin, so the move could help reduce pension fund deficits (it also probably means lower pay-outs for pension fund contributors, but err, never mind that for now). Read more
The UK’s consumer price index (CPI) measure of inflation fell to 2.3 per cent in April (year-on-year), versus 2.9 per cent in March, according to figures from the Office of National Statistics. While the number was lower than expected by the market, it still came in above the government’s 2 per cent target for inflation.
The retail price index (RPI) meanwhile came in at -1.2 per cent in April, the lowest level since records began in 1948. Read more
We were all much relieved in Britain at the end of March when a widely anticipated deflationary figure for RPI in February came in just above zero at 0.1 per cent.
Alas, such relief has proved short-lived. The latest inflation numbers from the UK’s Office of National Statistics present at -0.4 per cent the first negative annual reading for the retail price index since 1960. Here’s the relevant par from the release:
In the year to March, the consumer prices index (CPI) rose by 2.9 per cent, down from 3.2 per cent in February. In the year to March, the all items retail prices index (RPI) fell by 0.4 per cent, compared with no change in February, that is, an annual rate of 0.0 per cent. Over the same period, the all items RPI excluding mortgage interest payments index (RPIX) rose by 2.2 per cent, down from 2.5 per cent in February. Read more
The Bank of England has a rather smart set of pension fund managers. Take the below snippets, from the BoE employees pension fund report, 2008.
Major changes during the Scheme year
2007-08 was a year of major structural change for the Fund: Read more
Back to 1960!
Those expecting the first negative retail price index number in the UK since 1960, will be disappointed. The latest CPI/RPI figures from the Office of National Statistics show deflation has been successfully avoided in February. Here’s the Reuters table, where RPI comes in at a sturdy UNCH: