Carney Says U.K. Should Have Single Measure of Consumer Prices

(Bloomberg) -- Moving to a single measure of consumer prices in the U.K. is “highly desirable,” according to Bank of England Governor Mark Carney.

The U.K. now has three high-profile inflation gauges -- the Retail Prices Index, the Consumer Prices Index that the BOE targets, and CPIH, the Office for National Statistics’s preferred measure that also includes housing costs.

Read more: U.K. lawmakers join calls for changes to inflation gauge

RPI, which dictates payouts for more than 300 billion-pounds ($394 billion) of inflation-linked bonds, also feeds into changes in rail fares and student loans. It lost its quality mark from the ONS and has long been criticized for overstating average price gains.

“The move to a single or preferred measure of consumer prices is highly desirable. The path by which we get to that remains to be determined,” Carney said Tuesday, answering questions from the House of Lords Economic Affairs Committee.

The committee has urged the U.K. Statistics Authority to seek consent to alter the methodology for RPI. It tends to be higher than the more widely used CPI, which benefits investors and pensioners, while hurting rail commuters and people with student debt, all of whose payments are based on it.

A move away from RPI-linked debt has also been suggested before, but the Treasury said in 2013 it would continue to issue gilts linked to the measure.

“There’s all the signs there that a market can develop” for CPI-linked government debt, Carney said. If RPI should “become a legacy and then a distant memory in the fullness of time after some reasonable transition, then demand will absolutely be there.”

--With assistance from Jeannette Neumann, Stuart Biggs and Catherine Bosley.

To contact the reporter on this story: Jill Ward in London at jward98@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Brian Swint, Andrew Atkinson

©2019 Bloomberg L.P.