<p>The Retail Price Index (RPI) is a measure of the average change over time in the prices paid by households for a fixed basket of goods and services. It is one of the oldest and most widely used inflation measures in the UK.</p>

<h2>How It Works</h2>
<p>The RPI is calculated by the Office for National Statistics (ONS) using data collected from approximately 180,000 individual prices each month. These prices are collected from a wide range of retailers, including supermarkets, independent shops, and online stores. The goods and services included in the RPI are weighted according to their importance in the typical household's budget.</p>
<p>The index is calculated using the Laspeyres formula, which compares the cost of a fixed basket of goods and services in the current period with the cost in a base period. The base period for the current RPI series is 2015=100.</p>

<h2>Why It Matters</h2>
<p>The RPI is an important indicator of the cost of living and is used to adjust state benefits, pensions, and other payments for inflation. It is also used as a benchmark for indexing long-term contracts and financial instruments. However, the RPI is not without its critics. Some economists argue that it overstates inflation because it does not account for changes in consumer behavior in response to price changes. In 2017, the UK Statistics Authority announced that the RPI would no longer be designated as a National Statistic due to these methodological issues.</p>