Economic indicators - inflation notes 2025

What defines hyperinflation?

Hyperinflation occurs when inflation rates exceed 100%.

What was the highest inflation rate recorded in Venezuela in February 2019?

Inflation peaked at over 350,000% in February 2019.

What does CPI stand for in terms of measuring inflation?

CPI stands for Consumer Prices Index.

How is inflation calculated?

Inflation is calculated by finding the percentage change in the Consumer Prices Index (CPI) over a certain period.

What happens to the average price level when inflation falls from 5% to 3%?

The average price level is rising at a slower rate.

What is the base year value for index numbers?

In index numbers, the base year is given the value of 100.

What is stagflation?

Stagflation refers to a situation of stagnant economic growth combined with inflation.

What are three limitations of using price indices to measure inflation?

1. Changes in quality are not accounted for. 2. The CPI may ignore special offers. 3. Substitution effects are not reflected.

What does the term 'basket' of goods refer to in CPI calculations?

The 'basket' of goods refers to the selection of goods and services used to measure the average price level.

What is the purpose of the CPIH measure?

CPIH includes owner-occupied housing costs and council tax for a better measure of price rises.

What is the rate of inflation targeted by the UK government?

The inflation target is specified as a 2% increase (± 1% point) for the 12-month rate of change in the CPI.

How often is the CPIH recalculated?

The CPIH is recalculated each month.

Which index does the government consider as the 'headline rate' of inflation?

The Retail Price Index (RPI) is often considered the 'headline rate'.

What does PPI stand for?

PPI stands for Pensioners Price Index.

How is housing cost excluded in CPI calculations?

The CPI excludes owner-occupiers' housing costs, while RPI includes them.

What is the significance of weighting in CPI calculations?

Weights are used to reflect how much consumers spend on different goods and services.

What does RPIX measure?

RPIX is the inflation rate that excludes mortgage interest payments from the RPI.

Why might the CPI overstate inflation?

Because it does not account for improvements in quality or changes in consumer preferences.

What does HCIP stand for in the context of inflation measurement?

HCIP stands for Harmonised Indices of Consumer Prices.

Which measurement shows a wider population coverage: CPI or RPI?

CPI shows a wider population coverage than RPI.

What experience impacts the CPI's accuracy in reflecting individual household inflation rates?

Different household spending patterns can lead to inaccuracies in the inflation rate for individual households.