About this episode

This episode explores how inflation is calculated, focusing on the Consumer Price Index and its implications for the economy.

Inflation affects almost every part of the economy — from food prices and wages to pensions, mortgages, and central bank policy. But how is inflation actually calculated? In this episode, Skip Montreux and Dez Morgan look at the Consumer Price Index, or CPI, and explain how governments measure changes in the cost of goods and services over time. They start by explaining CPI, one of the main figures used to measure inflation. Dez explains how the Office for National Statistics in the UK tracks the price of a representative basket of goods and services. This basket includes many things people commonly buy, such as groceries, clothes, transport, household items, and services. Skip and Dez then discuss how this basket changes over time. The items are updated every year to reflect changes in consumer habits and lifestyles. This year, items such as hummus, alcohol-free beer, pet grooming services, and motorhomes were added to the UK basket, while premium lager bought in a pub was removed. Next, they look at why accurate inflation data is so important. CPI can influence pension increases, wage negotiations, and central bank decisions. If inflation is above a target level, a central bank…

People in this episode

Hosts: Skip Montreux, Dez Morgan

Topics covered

• inflation
• Consumer Price Index
• economic measurement
• cost of living
• central bank policy

Keywords

• inflation
• CPI
• Consumer Price Index
• economic growth
• interest rates
• pensions
• wages
• central bank

Mentioned in this episode

Organizations: Office for National Statistics

Places: UK

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