Problems - measuring inflation

Problems in Measuring Inflation

Family Expenditure survey does not include everybody e.g pensioners are excluded, but pensioners have different spending habits e.g. heating is more important. Young people will benefit more from falling prices of mobile phones
Changes in Quality: Computers have many more features than 10 years ago, so it is difficult to compare prices because they are different goods
One off shocks. E.G changes in tax rates or interest rates
People have different inflation rates.

RPI - old headline inflation rate
RPIX - RPI less mortgage payments this is the underlying rate.
This is used because interest rates are increased to reduce inflation but this higher interest rates increase the cost of mortgage repayments
RPIY = RPIX less taxes ( This is sometimes known as the harmonized rate)
CPI - Consumer Price Index