When an indirect tax is raised, it is assumed that the price of the product concerned increases by the entire amount of the tax. But in practice the company or shop selling the product can rarely increase the price by the full amount; usually only by a part of it. Demand would otherwise decline too much. But when the CPIX is calculated, the entire tax increase is deducted. An increase in indirect taxes can thus have the paradoxical effect that the CPIX falls. Another complication is that excise duty is normally written up by some measure of price movements. This in turn is because the tax on, for instance, alcohol is not expressed as a percentage of the price but as SEK per litre. Correspondingly, the taxes on energy and tobacco are stated in terms of SEK per kilowatt-hour and SEK per gramme. If all prices rise by 2 per cent a year, then the excise duty's share of the consumer price would fall over time. To prevent this from happening, excise duties are indexed. The excise duty on, for instance, petrol is written up by the annual rate of increase in the CPI in June of the previous year. But when the CPIX is calculated, each increase in excise duties is deducted from the CPI, even if it is only due to indexing. This means that the indexing of excise duties also contributes to a difference in CPI inflation and CPIX inflation in the long term.
This is because at least some of the houses bought prior to the price rise today are sold at a higher price. The calculated mortgage interest expenditure for home-owners can thus change even if the interest rates remain unchanged, if the acquisition value of the housing stock changes. This is an effect that will have significance in the future. House prices have risen over a long period of time, and this will gradually have an impact on the capital stock index. Without going into any technical details regarding calculation methods, one can observe that this is the main reason why mortgage interest expenditure for home-owners will increase in the coming years – or, in other words, why CPIX inflation will be below CPI inflation. The Riksbank is assuming that the difference in the rate of increase between the CPI and the  BIS Review 73/2008  3  CPIX as a result of the housing stock increasing in value will be approximately 0.2 percentage points several years ahead. The fact that mortgage interest expenditure for home-owners is affected not only by changes in interest rates but also by the way house prices develop comes as no surprise. But one can say that the trend rate of increase in the capital stock has meant that the problem has gradually become more tangible. Other problems with the CPIX There are also other problems with the CPIX, related to calculation methods, which have perhaps not received so much attention. The CPIX measure adjusts for indirect taxes.