Inflation fell quite sharply in December. A final 0.1 percent monthly dip in prices matched the provisional reading and saw the annual rate slide from November's final 6.2 percent to 5.9 percent, a 3-month low.

The flash HICP was also unrevised and so still shows a 0.1 percent fall versus November that trimmed its yearly rate from 7.1 percent to 6.7 percent, now some 4.7 percentage points above the ECB's target.

However, the fall in the annual CPI rate was largely attributable to energy (15.1 percent after 18.4 percent) although services (2.9 percent after 3.0 percent) were also a little weaker. Overall manufactured products (4.6 percent after 4.4 percent) accelerated again while food (12.1 percent after 12.0 percent) was also marginally higher. Consequently, the core rate was unchanged from October's 5.3 percent.

French inflation remains low in comparison with most of the rest of the Eurozone but December's headline drop is misleadingly sharp and masks much more resilient underlying developments. The central bank sees the headline rate falling to 4 percent towards the end of the year but any decline in the core rate is likely to be much shallower. Today's update puts the French ECDI at minus 11 and the ECDI-P at 5. Both readings indicate that recent overall economic activity has contained no major surprises.

No revisions are expected to the provisional data.

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.