Implied RPI is the inflation a gilt's real and nominal yields together imply over its remaining life, which is a market price rather than a forecast and a different kind of number from the published RPI annual rate.
Two numbers that look like the same thing
Put an index-linked gilt's implied RPI beside the Office for National Statistics' latest published RPI annual rate and the two figures sit next to each other looking comparable. They are not. One is the inflation the market is pricing into a gilt for the years it still has to run. The other is a realised change in a price index over the twelve months to a stated month. Reading the second as though it were the first is an easy way to misread an index-linked gilt, and it is worth separating the two properly.
The distinction is not pedantry. A published rate tells a reader what has happened; an implied rate tells a reader what the market is charging for. A gilt bought on the strength of a high published print and a high implied RPI is being bought on two different pieces of information, and only one of them is about the future.
What the site's implied RPI actually is
GiltIQ reports implied RPI per index-linked gilt from the day's report. The figure is built from the report's fitted nominal yield curve and its fitted real yield curve, each interpolated at that gilt's own term to maturity, and combined as a ratio rather than a subtraction: one plus the nominal yield, divided by one plus the real yield, less one. The ratio matters. Subtracting one yield from the other ignores the fact that the real return compounds alongside the inflation over the same horizon, and the subtraction overstates the answer by that cross term.
Three properties follow from how the figure is built, and each one is worth stating plainly. It is a market-implied number: it falls out of two prices, so it measures how the market is pricing inflation rather than what anyone thinks inflation will be. It is specific to a term: a gilt maturing in five years and one maturing in thirty do not have to imply the same figure, and the curve across maturities is itself informative. And it moves whenever either yield moves, so it can change on a day when no inflation data has been published at all.
Implied RPI is the annual inflation a gilt's real and nominal yields imply. It is derived from two prices, not published by anyone, and not a forecast.
What a breakeven is, and what it is not
A breakeven inflation rate is the rate at which a nominal investment and a real investment would come out the same over a horizon. It is a statement about two prices, and it is a useful one in the UK precisely because both kinds of gilt are issued by the same borrower: the credit is identical, so what is left between the two yields is mostly inflation. Stated that way, the site's implied RPI is a breakeven computed at a gilt's own term, and the two words describe the same arithmetic.
What a breakeven is not is a promise. It carries no obligation on anyone to deliver that rate, and it rests on the two instruments being comparable in horizon and in the way they trade. Nor is it the same thing as a figure produced from a single index. Setting a real yield against one published inflation number produces a quantity that mixes a forward-looking yield with a backward-looking realised rate, and the mixture has no horizon in common: the yield runs to maturity, the published rate covers the last twelve months. That construction is not a breakeven, even when it is presented as one.
The published RPI rate is a different kind of number
The Retail Prices Index is a monthly price index published by the Office for National Statistics. Its annual rate is the change between one month's index value and the same month a year earlier, and it is published after the month it describes has ended. Everything about it points backwards. The table sets the two figures against each other on the properties that matter for reading them.
| Property | Implied RPI for a gilt | Published RPI annual rate |
| What it measures | The inflation the gilt's two yields imply | The change in a price index over twelve months |
| Which way it looks | Forward, over the gilt's remaining life | Backward, over a period that has ended |
| Who produces it | The gilt market, through its prices | The Office for National Statistics |
| How often it moves | Whenever either gilt yield moves | Once a month, on the publication date |
| Whether it is a forecast | No — a market price | No — a record of what happened |
| Whether it can be relied on to recur | No. It is a price, not a promise | No. It says what prices did, not what they will do |
Reading down the middle column and then the right-hand one makes the point better than either column alone: the two figures differ in direction, in owner, in cadence and in what they would mean if correct. There is no correction that turns one into the other.
The comparisons the juxtaposition invites
Because the two numbers sit near each other on a page, a handful of comparisons suggest themselves and most of them are wrong. The list below takes the common ones in turn.
- Treating implied RPI as the market's inflation forecast. It is the price the market charges for inflation cover, and a price includes what holders will pay for certainty as well as what they expect to happen.
- Treating the published annual rate as the rate a gilt will pay. The gilt's cash is scaled by the index values its own terms point at, month by month, over years.
- Comparing a long-dated gilt's implied RPI with a twelve-month print and calling the gap an expectation error. The two figures cover different periods, so the difference between them is not a forecast that failed.
- Subtracting the real yield from the nominal yield and treating the result as implied RPI. The compounding means the subtraction is not the same figure, and the site's own figure uses the ratio.
- Assuming one implied RPI applies to the whole index-linked list. Each gilt implies its own, at its own term, and the spread between them is a real observation rather than noise.
Where both figures live
The index-linked gilts in issue carries an implied RPI figure for each gilt, in the same row as its clean price, its index ratio and its real yield, so the inputs to the comparison are visible beside the answer. The gilt's own page adds the real yield behind the figure.
The par RPI curve puts the same figures on a chart: one point per priced index-linked gilt, at its implied RPI, with a fitted par curve through them. Reading the curve rather than a single column is what makes the term structure visible, and it is where a reader can see whether the market prices a different inflation rate for the short end than for the long. The published RPI annual rate is not on that page, because it is not the same quantity.
One more figure belongs in the same conversation without being either of these: the assumed inflation rate the site applies to an index-linked gilt's cash flows beyond the latest published RPI. That is an input, chosen and shown, and it is neither a market price nor a published statistic. A projection that uses it is marked accordingly.
Background, not advice
This article explains what implied RPI measures and how it differs from a published inflation rate; it is general background, not investment, tax or legal advice for any reader's circumstances. Implied RPI is derived from the gilt market's own prices, the Retail Prices Index is published by the Office for National Statistics, and the gilt's terms and the eight-month and three-month indexation lags are described by the Debt Management Office, which are the primary sources for each. Neither figure tells a reader what inflation will be, and an index-linked gilt's cash can fall as well as rise.