UK DMO launches CPI consultation

LONDON: The UK Debt Management Office launched a three-month consultation with investors on Wednesday into issuing gilts that are indexed to consumer price inflation rather than retail price inflation.

The consultation had been widely expected, and the DMO said it would look at potential demand for CPI-linked gilts, the effect of their issuance on the liquidity of the index-linked market and how much effort would be required to issue them.

The consultation will end on Sept. 22. Britain's government is switching the indexation of many public benefits and pensions to CPI which the Bank of England targets from the older RPI measure. Few private companies and pension providers have followed suit.

Index-linked gilts are often purchased by pension funds and insurers who face long-term inflation-linked liabilities.

Copyright Reuters, 2011