LONDON (Reuters) - Britain’s statistics watchdog on Monday put its stamp of approval on CPIH, the gauge of inflation preferred by official statisticians, following improvements to address quality concerns.
The Office for National Statistics (ONS) first published CPIH, a measure that includes more housing costs, as an official statistic in 2013.
But the body which supervises the ONS said in 2014 that it fell below acceptable quality standards, in part because of concerns about the way it measures owner-occupier housing costs, based on rental prices.
On Monday, the UK Statistics Authority said it was now satisfied that the ONS had rectified this.
“I am pleased to confirm the re-designation of CPIH as a National Statistic,” said Ed Humpherson, director general for regulation at the UK Statistics Authority.
“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.”
In March the ONS adopted CPIH as its official gauge of inflation in place of the widely-used Consumer Prices Index (CPI).
Britain’s Treasury uses CPI as the benchmark for the Bank of England’s 2 percent inflation target, but the seal of approval for CPIH potentially paves the way for a change.
Annual inflation rates measured by CPI and CPIH have generally been similar and both rates fell in June to 2.6 percent.
CPIH does not measure house prices or mortgage payments, but instead estimates how much home-owners would pay to rent their own homes. It also includes council tax, a local property levy.
Some statisticians think the way it uses rental values to calculate overall housing costs is flawed.
On Monday the Statistics Authority said the current method was reasonable, but added that the ONS should keep it under review and publish estimates using alternative methods for measuring these costs.
An older measure that also includes some housing costs, RPI, is used by the government to determine interest payments on inflation-linked bonds and student loans, as well as in many commercial contracts.
RPI is typically 1 percentage point higher than CPI, and the ONS says it is not an accurate gauge of inflation.
“We are building a suite of measures as an alternative to the RPI,” the ONS’s director-general, Jonathan Athow, said. “CPIH is our lead measure of inflation and offers the most comprehensive picture of how prices are changing.”
Reporting by Andy Bruce, editing by Alister Doyle