As the UK Consumer Prices Index (CPI) annual rate of inflation rose to 4.5% in April, up from 4% in March we explain why and the difference between CPI and RPI. We also detail what impact both measures have on consumers.

The Consumer Prices Index (CPI)

According to The Office of National Statistics (ONS) the largest upward pressures to the change in CPI annual inflation between March and April came from the rise in transport costs, fares up 29% in particular air and sea fares which rose by 22%, as well as a 5.3% increase in alcohol and tobacco. However, clothing and footwear prices dropped by 1.3%.

CPI is at its highest level since October 2008 and is used by Bank of England to set interest rates.

Retail Prices Index (RPI)

This includes housing costs such as mortgage interest payments and council tax rose fell slightly to 5.2% from 5.3% in March.

RPI is used to negotiate wage increases, pensions, state benefits and index linked guilts.

Either one of these inflation measures can have a major influence on the economy as they will affect interest rate decisions, pensions and wage settlements.

Full report can be found at: statistics.gov.uk

DebtWizard comment

With inflation running just above 5% (RPI), which includes housing costs, and many thousands of employees having pay freezes this year this it is obvious more families will be under pressure with their finances.

We have tough times ahead and need to tighten the belt, those who find it all too much should seek advice on how best to manage their debts as soon as possible.

Useful links;

Debt Survival Kit - Everyone needs one of these

Helpful organisations - Where to get debt advice, includes debt charities

Budget Wizard - A free tool to help you plan your monthly budget.