January 12, 2017 01:45 CST

Consensus Actual Previous
Year over Year 0.6% 0.6% 0.6%
Month over Month 0.3% 0.3% 0.3%

The final December CPI showed no changes to the provisional data. A 0.3 percent monthly increase in prices saw the annual inflation rate edge a tick firmer to 0.6 percent, its highest reading since May 2014.

The final HICP similarly matched its flash print, also rising 0.3 percent versus November for a 0.8 percent yearly rate that was 0.1 percentage points higher than in mid-quarter.

The headline acceleration is good news but it flatters to deceive. Hence, seasonally adjusted, the CPI was only 0.1 percent firmer than in November and the core index, which excludes public sector prices, the most volatile categories and taxes, actually fell 0.1 percent as services held steady while manufacturing posted a 0.3 percent decline.

In other words, underlying trends remain soft. A pick-up in economic growth last quarter may help to provide a slight lift going forward but it will need to be sustained if inflation is to get anywhere close 2 percent in the foreseeable future.

The consumer price index (CPI) is a measure of the average price level of a fixed basket of goods and services purchased by consumers. Monthly and annual changes in the CPI represent the main rates of inflation. The national CPI is released alongside the HICP, Eurostat's harmonized measure of consumer prices. A flash estimate was released for the first time in January 2016 and is now published towards the end of each reference month.

The consumer price index is the most widely followed indicator of inflation. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. In countries where monetary policy decisions rest on the central bank's inflation target, the rate of inflation directly affects all interest rates charged to business and the consumer. As a member of the European Monetary Union, France's interest rates are set by the European Central Bank.

France like other EMU countries has both a national CPI and a harmonized index of consumer prices (HICP). The HICP is calculated to give a comparable inflation measure for the EMU. Components and weights within the national CPI vary from other countries, reflecting national idiosyncrasies.

Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets - and your investments. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.

By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.