Inflation was revised slightly stronger in the final data for January. An 8.6 percent annual rate was a tick firmer than the flash estimate, albeit still well down on December's final 9.2 percent. The decline, which reflected a shallower revised 0.2 percent monthly fall in prices, means that the yearly rate now matches its lowest level since last May but also still leaves a gap of fully 6.6 percentage points versus the ECB's 2 percent target.

In fact, in line with December, the deceleration in the overall rate was not mirrored in the key core measures. Rather, both the narrowest gauge and the index excluding just energy and unprocessed food were also revised up 0.1 percentage point to new all-time highs of 5.3 percent and 7.1 percent respectively. More generally, the rate for non-energy industrial goods jumped from 6.4 percent to 6.7 percent while its services counterpart was flat at 4.4 percent. Energy (18.9 percent after 25.5 percent) subtracted significantly but food, alcohol and tobacco (14.1 percent after 13.8 percent) continued to provide a boost.

Regionally, the picture was very mixed, partly reflecting differences in the energy crisis support packages offered by the various member states. Hence, falls in Germany (9.2 percent after 9.6 percent) and Italy (10.7 percent after 12.3 percent) contrasted with rises in France (7.0 percent after 6.7 percent) and Spain (5.9 percent after 5.5 percent). Elsewhere, Latvia (21.4 percent) remained at the top of the inflation ladder ahead of Estonia (18.6 percent).

The stickiness of the core rates all but guarantees that the ECB will deliver on its promise to raise key interest rates by a further 50 basis points next month and probably means that there will be more to come in May. Today's update puts the Eurozone's ECDI at 5 and the ECDI-P at minus 8, both measures being close enough to zero to signal no major surprises in overall economic activity.

No revisions are expected to the provisional data.

The harmonised index of consumer prices (HICP) is a measure of consumer prices used to calculate inflation on a consistent basis across the European Union. Changes in the index provide an estimate of inflation, as targeted by the European Central Bank (ECB). Eurostat provides statistics for the EU and Eurozone aggregates, individual member states and for the major subsectors. Over the short-term, the central bank focusses on a number of core measures which seek to strip out the most volatile components and so give a much better guide to underlying developments. Amongst these, financial markets normally concentrate upon the narrowest gauge which excludes energy, food, alcohol and tobacco.

The measure of choice in the European Monetary Union (EMU) is the harmonized index of consumer prices which has been constructed to allow cross member state comparisons. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. In the European Monetary Union, where monetary policy decisions rest on the ECB's inflation target, the rate of inflation directly affects all interest rates charged to business and the consumer.

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.

Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. 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 HICP are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.