Harmonised Index of Consumer Prices
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The Harmonised Index of Consumer Prices (HICP) is an indicator of inflation and price stability for the European Central Bank (ECB). It is a weighted average of price indices of member states in order to show what the consumer price index does for the entire Eurozone. One goal of the ECB in fighting to keep price stability is to keep the HICP below 2% for the medium term. In order to do that, the ECB can control the short term interest rate through Eonia, the European over night index average, which affects market expectations.
The HICP differs from the US CPI in two primary aspects. First, the HICP attempts to incorporate rural consumers into the sample while the US maintains a survey strictly based on the urban population. In actuality, the HICP does not fully incorporate rural consumers since it only uses rural samples for creating weights; prices are only collected in urban areas. The HICP also differs from the US CPI by excluding owner-occupied housing from its scope. The US CPI calculates "rental-equivalent" costs for owner-occupied housing while the HICP contents such expenditure as investment and excludes it. The Bureau of Labor Statistics, the producer of the US CPI, has recently calculated an experimental index designed for direct comparison with the HICP.[1]
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[edit] External links
- Harmonized Indexes of Consumer Prices: Their Conceptual Foundations ECB working paper no. 130 (PDF 856 KB)
- HICP Short Guide for Users Eurostat
- HICP section on Eurostat's website Eurostat
