Update: UK CPIH Inflation Measure Made A National Statistic

--Clarify: Story Recast To Note Announcement Came From Director General For

Regulation

--Announcement Opens Door To Switch of Inflation Target

By David Robinson

     LONDON (MNI) - The UK statistics regulator announced Monday that CPIH, the

inflation measure that includes housing costs, has been re-designated as a

national statistic.

     Ed Humpherson, Director General for Regulation, said in a letter to John

Pullinger, the National Statistician, that CPIH had regained its status as a

national statistic. The announcement opens the door to it being used as the

inflation target and the Office for National Statistics is already focussing on

CPIH 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," Humpherson said.

     "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," Humpherson 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,"

Humpherson 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 a CPIH

goal.

     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.

     Humpherson's letter noted, however, that some users had told the regulators

that they wanted to further monitor CPIH before deciding whether to use it -

which could point to a delay before it is widely adopted.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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

[TOPICS: MABDS$,M$B$$$,M$E$$$]