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Harmonized Index of Consumer Prices (HICP): What It Is and How It Works

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Adam Hayes
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Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

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Updated July 29, 2024
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What Is the Harmonized Index of Consumer Prices (HICP)?

The Harmonized Index of Consumer Prices (HICP) is a measure of inflation in the European Union (EU). It reflects change over time in the prices paid by households for a representative basket of goods and services. The European Central Bank (ECB) uses the HICP for the Eurozone comprising the 20 EU states using the euro common currency to pursue its objective of price stability, defined as 2% annualized inflation over the medium term.

Key Takeaways

  • The Harmonized Index of Consumer Prices (HICP) is a measure of inflation in the Eurozone and the European Union.
  • The HICP tracks consumer price inflation based on the spending patterns of consumers in each EU country, weighted according to that country's share of aggregate consumer spending.
  • The most important HICP number for financial markets is the monthly flash estimate of the Monetary Union Index of Consumer Prices, reflecting inflation in the Eurozone comprising the 20 EU states using the euro currency.
  • The ECB uses the MUICP to calibrate its pursuit of price stability, aiming for 2% inflation over the medium term.

Understanding the Harmonized Index of Consumer Prices (HICP)

Each EU state's statistical agency compiles a national HICP using a common methodology. Eurostat, a department of the European Commission, then uses the national HICPs to calculate the Monetary Union Index of Consumer Prices (MUICP), the aggregate HICP for the 20-country Eurozone area that serves as the ECB's primary inflation gauge. Eurostat also calculates the European Index of Consumer Prices (EICP) covering the entire European Union as well as the European Economic Area Index of Consumer Prices incorporating data from EU trading partners Norway, Iceland, and Liechtenstein.

The flash estimate of the Eurozone's MUICP, published by Eurostat on the last working day of each month, is a key economic release for financial markets.

Each country's HICP measures the change over time in the prices of a basket of goods and services reflective of the spending patterns of that country's households. The index tracks the prices of goods such as coffee, tobacco, meat, fruit, household appliances, cars, pharmaceuticals, electricity, clothing, and many other widely used products and services. Owner-occupied housing costs are excluded from the HICP, though the ECB's Governing Council recommended their inclusion in 2021.

Weighted Baskets

Eurostat calculates the Monetary Union Index of Consumer Prices using the weighted average of the HICP from each country in the euro area based on the country's share of aggregate Eurozone consumer spending.

Each country's HICP measures the change over time in the prices of a basket of goods and services representative spending by that country's households.

The baskets of consumer goods and services and the weightings of each country are updated annually to reflect the most recent spending patterns.

The MUICP was first compiled in 1998 ahead of the euro currency's launch on Jan. 1, 1999.

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  1. Eurostat. "Harmonized Index of Consumer Prices (HICP) — Overview."

  2. European Union. "Countries Using the Euro."

  3. European Central Bank. "Measuring inflation – the Harmonized Index of Consumer Prices (HICP)."

  4. Eurostat. "Concepts and Definitions: Harmonized Indices of Consumer Prices (HICPs)."

  5. Eurostat. "Release Calendar for Euro Indicators."

  6. Eurostat. "Information on Data."

  7. European Central Bank. "Letter From the ECB President to Mr. Engin Eroglu," Page 1.

  8. European Central Bank. "Measuring Inflation—The Harmonized Index of Consumer Prices (HICP)."

  9. Eurostat. "New Monetary Union Index of Consumer Prices (MUICP)."

  10. European Central Bank. "The Euro: The Birth of a New Currency."