UK CPIH Inflation Measure Re-designated As National Statistic

-Announcement Opens Door To Switch of Inflation Target

By David Robinson

     LONDON (MNI) - John Pullinger, the National Statistician, announced Monday

that CPIH, the inflation measure that includes housing costs, has been

re-designated as a national statistic.

     Pullinger said that the Board of the Statistics Authority was not making a

judgement about what role CPIH should play. The move, however, opens the door to

it being used as the inflation target and the Office for National Statistics is

already focussing on it as the key inflation measure.

     "On behalf of the Board of the Statistics Authority, I am pleased to

confirm the re-designation of CPIH as a National Statistic," Pulling said in a

letter published Monday.

     "In coming to our decision about National Statistics designation, we do not

have a view about whether CPIH should be presented as a headline or preferred

measure of inflation. Our judgement is simply about whether CPIH, as one

possible measure of inflation, complies in full with the Code of Practice for

Official Statistics," Pullinger added.

     CPIH lost its status as a national statistic because of problems in the way

rents, which it uses as a proxy for owner occupied  housing costs, were

calculated but this technical problem has been overcome.

     "Quality assurance of the rents data has improved significantly," Pullinger

said.

     The Bank of England Monetary Policy Committee is current set a 2% CPI

target, but with CPIH now a national statistic this could be changed to CPIH.

     Former Bank of England Monetary Policy Committee member Martin Weale, who

sits on the experts panel at the ONS, said in a Market News interview published

Friday that CPIH should become the key inflation measure once the technical

issue had been resolved and people had confidence in it. Adopting it as the

inflation target would speed up its acceptance.

     "If it (CPIH) were adopted as the inflation target that would in itself

make it the focus of attention," Weale said.

     The wedge between CPIH and CPI has been, at most, slight and Weale argued

against raising or lowering the 2% target to take into account any wedge.

     "There is an argument for keeping the inflation target simple," he said.

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

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