CPI vs HICP vs core inflation: the differences explained
Three concepts that appear in economic news but few people can distinguish. We explain them with clear examples.
When you hear on the news that “inflation has risen”, they usually mean the CPI. But there are several inflation indicators and it’s important not to confuse them — each measures something different and serves a different purpose.
CPI — Consumer Price Index
Measures the change in prices of a basket of goods and services representative of household consumption in a country. In the UK it’s published monthly by the ONS (Office for National Statistics).
Key characteristics:
- Basket adapted to national household spending habits
- Includes all goods and services, including energy and fresh food
- Reference indicator for pension uplifts, wage negotiations and rent reviews
HICP — Harmonised Index of Consumer Prices
The European equivalent, calculated with the same methodology across all EU countries to allow direct comparisons. Used by the European Central Bank (ECB) to set monetary policy.
Differences from national CPI:
- Standardised methodology across Europe
- Excludes some items included in national CPIs (e.g. owner-occupier housing costs in some countries)
- In most countries it differs slightly from the national CPI
The ECB aims to keep the euro area HICP close to but below 2% over the medium term.
Core inflation
This is the CPI excluding unprocessed food and energy products, which are the most volatile components because they depend on external factors (weather, oil prices, geopolitical tensions).
Why does it matter?
Core inflation better reflects the underlying structural trend in prices. If core inflation is high but the headline CPI falls, it means energy is pulling the headline down but underlying price pressures remain.
In short: when energy prices spike, headline CPI surges but core inflation may stay contained — a signal that inflation is not yet embedded across the whole economy.
Comparative example (UK, 2022)
| Indicator | Annual 2022 |
|---|---|
| Headline CPI | +10.1% |
| HICP | +9.6% |
| Core inflation | +6.4% |
In 2022, energy drove headline CPI to double digits, but the more contained core reading suggested that part of the inflation spike could be temporary — which proved correct as energy prices eased through 2023.
Which measure to use?
- Comparing across countries: HICP
- Negotiating wages or rent increases: national CPI
- Analysing the underlying trend: core inflation
- ECB monetary policy decisions: euro area HICP
Use our inflation calculator to see how CPI has evolved across European countries since 1960.