Consumer prices were again significantly stronger than expected at quarter-end. A 0.8 percent monthly spurt was 0.3 percentage points more than the market consensus but, with base effects strongly negative, still small enough to trim the headline annual inflation rate from 10.4 percent to 10.1 percent. Even so, the fall in the yearly rate only reversed February's increase and leaves inflation fully 8.1 percentage points above the BoE's medium-term target.

The main negative effect on the change in the annual rate came from transport where prices rose only 0.3 percent on the month versus a 2.4 percent jump in March last year. Furniture and household goods (1.9 percent versus 1.3 percent), clothing and footwear (1.6 percent versus 2.4 percent) and restaurants and hotels (1.2 percent after 2.0 percent) also provided a drag. On the upside, the main positive effects came from food and non-alcoholic drink (1.1 percent versus 0.2 percent) and recreation and culture (1.0 percent versus 0.5 percent).

As a result, the core CPI was up a steep 0.9 percent on the month, leaving the underlying annual inflation rate unchanged at 6.2 percent and only 0.3 percentage points short of the high seen in September/October last year.

Today's report will not impress the BoE and further bolsters the likelihood of another 25 basis point hike in Bank Rate next month. More generally, the UK's ECDI now stands at 10 and the ECDI-P at minus 13, the gap between the two measures underlining the recent surprising strength of domestic prices.

Consumer prices are expected to increase 0.5 percent on the month in March for a 9.8 year-over-year rate. Respective rates in February, which were much higher than expected, were plus 1.1 and 10.4 percent.

The consumer price index (CPI) is an average measure of the level of the prices of goods and services bought for the purpose of consumption by the vast majority of households in the UK. It is calculated using the same methodology developed by Eurostat, the European Union's statistical agency, for its harmonised index of consumer prices (HICP). The CPI is the Bank of England's target inflation measure.

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 such as the UK, 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. Inflation is an increase in the overall price level 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 CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.

For monetary policy, the Bank of England generally follows the annual change in the consumer price index which is calculated using the European Union's Eurostat methodology so that inflation can be compared across EU member states.