Reweighted UK inflation tracks economic slack more closely
UK rigidity-centrality-weighted inflation stood at 3.3 percent in August 2026. Bank of England analysis published on October 19, 2026 finds that the measure tracks underlying cost pressures more closely than headline inflation.
85 components, different weights
Tim Munday, Joseph Oyegoke, Adrian Paul and Tim Willems construct a UK inflation index that gives greater weight to rigid prices and sectors supplying inputs across the economy.
Their rigidity-centrality-weighted (RC) measure reweights 85 consumer price index (CPI) subcomponents.
Price-change probabilities draw on Office for National Statistics (ONS) microdata for 2000–19; network weights use the ONS's 2023 input-output tables.
Following Rubbo (2023), the authors combine price rigidity with sectoral sales shares relative to GDP and normalize the weights.
RC inflation reached 3.3 percent in August 2026, down from post-Covid highs, with no marked pickup following the recent energy-price increase.
A clearer Phillips Curve
The authors test whether RC inflation better reflects the output gap using a Phillips Curve with a baseline four-quarter lag.
Estimation starts with 16 quarters from Q2 1997, producing coefficients from Q2 2001, then expands quarterly.
Headline CPI yields a typically negative, unstable output-gap coefficient; RC inflation yields a consistently positive, more stable coefficient and better fit.
The authors argue that central-sector inflation transmits costs widely, while rigid-price inflation more clearly reflects overheating.
A signal with conditions
The authors present RC inflation as a real-time indicator with few subsequent revisions, not a replacement inflation target.
Price-flexibility estimates require imputations, and the theoretical case depends on assumptions about wages and price resetting.
The article does not necessarily reflect policy committee members' views.
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