The indicator monitors retail price changes for goods and services included into the consumer goods basket. The index calculation includes food and clothing prices, education expenditures, as well as prices for public health services, transportation, utility payments and leisure. The index is a monthly calculated value and is the basic “barometer” of the inflation rate in any country including Great Britain.
It is considered to be the most important inflationary indicator.
Central Banks general practice in every country is to set up the inflationary target level that allows for the optimal economic development rate for the country. The Bank of England target inflationary level is 2%. The high rate of inflation raises the chances to increase the bank rate by the country’s Central Bank. Low inflation rate allows for more active economic stimulation by the Central Bank, and decreases the bank rate or applies quantitative easing in particular (when it is necessary).
Effect of market
The index growth or the actual value rise exceeding the forecast is a positive sign for the British Pound.
The significant forecast deviation may have a strong influence on the British Pound dynamics.