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Comparability aspect of CPI favoured

Accountant distills CPI/ RPI difference

Concern about the use of different measures of inflation by the Manx government has been raised by the public and politicians recently.

The Treasury Minster was urged to issue a central guideline on the use of two indices in the House of Keys this week.

The Consumer Price Index (CPI) is dominant - it put the annual rate of inflation in February at 1.9% and is used to set benefit and wage rises.

The older, less favoured Retail Price Index (RPI) currently measures inflation at 7.1% and was the guide for a rise in the 2017 water rate, of 6.4%.

Each index is based on a basket of goods - but they contain different items and calculations are made in different ways.

Accountant Steve Billinghurst from PwC says the CPI is the most reliable measure for comparison between countries.

He explained why there are two inflation indices:  

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