Inflation is the tendency for the price of goods and services to rise over time.
In the UK, the government’s preferred measure of inflation is the Consumer Prices Index (CPI). However, as I explained in What Inflation Means To You, the CPI excludes housing costs, which makes it an unrealistic guide to the rising cost of living. Hence, I much prefer the Retail Prices Index (RPI) as a guide to my rising cost of living. According to the Office for National Statistics, the RPI currently stands at 3.6%, so its basket of goods and services which cost £100 last year now cost £103.60….
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