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The inflation rate increased to 2.8% in February. This was up from 2.7% in January and considerably higher than the government target of 2.0%. The inflation rate is based on the Consumer Prices Index (CPI) compiled by the Office of National Statistics (ONS). According to the ONS, the rise is partly due to the cost of air travel following increases in passenger duty. However, petrol prices have fallen along with the cost of other items such as computer games.
The Retail Prices Index (RPI) rose from 4.2% in January to 4.6% in February. This is the highest RPI since 1991. Mortgage interest payments are included in the RPI so the increasing cost of housing is a major factor.
The ONS uses the cost of around 650 items as a basis for compiling the CPI and RPI each month. Consumer trends are reflected in the inflation basket as spending on a particular item has to reach a certain level before it is included. The contents are reviewed each year and changes have now been made for 2007. For the first time credit card charges and mortgage arrangement fees will be included. Advances in technology are recognised with the addition of digital radios, mobile ringtones and satellite navigation systems, while the video recorder and walkman cassette player have been dropped. Changing tastes mean olive oil and courgettes are in while brussels sprouts and vegetable oil no longer feature!
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