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Eurostat's decision
National statistics institutes regularly change the base year of their consumer price index (CPI). The index value for the year in which the new base is introduced is set at 100.
Eurostat will proceed to a base year of the harmonised indices of consumer prices (HICP) on next January 2006 : This new index 2005 = 100 replaces the old base 100 = 1996 price index. The Office plans to publish, on 28 February 2006, the January HICPs for Monetary Union, Euro zone and European Economic Area and the special aggregates, as the ex-tobacco HICP.
In addition, as from January 2006, index levels will be published rounded to two decimals. The variation rates will be published rounded to one decimal place, as now.
The impact of a base year change in the consumer price index on inflation-indexed bonds
A base year change entails resetting the base for daily inflation references, but it does not affect the indexation coefficient.
All of these bonds' flows are multiplied by an indexation coefficient, which is equal to the ratio between the daily inflation reference on the flow payment date and the daily inflation reference on the security's due date.
The daily inflation reference is itself calculated by interpolation of the ex-tobacco IPCUM index.
Both references must, of course, be calculated according to the same base, even though a base change may have occurred between the two dates.
The OAT€i's indexation mechanism is not affected by the resetting of the base as it ensures a smooth transition between the two bases.
The connection will occur on the December HICP, which corresponds to the daily inflation reference from March, 1st 2006. The coefficient 2005 factor enabling the passage from daily inflation references (DIR) in base 1996 to base 2005 is the following coefficient:
