Inflation refers to the continual increase in prices. The value or purchasing power of money refers to the amount of goods or services one pound can buy.
Inflation means the value of money is falling because prices keep rising.
For example, food, clothing and transport are included in the basket. For example, food has a higher weighting than transport. The price relative of each item is then multiplied by its weighting. The value of the RPI in the base year is always 100. After twelve months the price of good items in the basket may have risen by 25 per cent and that of housing by 20 per cent while the cost of transport is unchanged.