Re-Heat - I was simplifying. So you are correct in what you say. If you want to escalate the inflation targeting debate to Jedi level then so be it.
As is well known, CPI inflation is likely to be around 0.8 percentage points below RPIX inflation in the long run (see Nickell {MPC member}, 2003)
http://papers.ssrn.com/sol3/papers.c...#PaperDownload
Most of this difference (0.5 percentage points) is down to the varying formula used to aggregate the inflation rates of all the different goods. The remaining 0.3 percentage points of the long-run difference is down to the exclusion of housing depreciation and Council Tax from CPI.
While the long-run impact of this exclusion is somewhat small, in the short run it can,
and recently has had, a very substantial effect on the difference between CPI and RPIX inflation. Actually, because of the fact that the housing depreciation element of RPIX is based on house price inflation, throughout 2003/4/5 RPIX inflation was significantly above target whereas CPI inflation was below its subsequent target.
During this period the difference between the two measures of inflation was well over a percentage point.
<Jedi mode off>
House prices will crash 20%+ there will be a major recession and lots of airlines will go bust.
That's the easy bit to understand. The causes will only properly be understood in 2070 by Ben Bernakes Grandson.
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