Eurozone inflation accelerated in April for the first time since last October. At 7.0 percent, the flash annual rate was just a tick higher than March's final 6.9 percent and in line with the market consensus. The latest reading was the second lowest since February 2022 but still fully 5.0 percentage points above the ECB target.

Importantly, the pickup in the headline rate was not mirrored in the core rates. Hence, the narrowest measure eased a tick from March's 5.7 percent record high to 5.6 percent, its first decline since June 2022. Similarly, excluding just energy and unprocessed food, the rate cooled from an all-time peak of 7.5 percent to 7.3 percent. Elsewhere, non-energy industrial goods inflation fell from 6.6 percent to 6.2 percent but, more ominously, inflation in services (5.2 percent after 5.1 percent) edged firmer again. Energy (2.5 percent after minus 0.9 percent) also provided a boost but food, alcohol and tobacco (13.6 percent after 15.5 percent) for once decelerated.

While the ECB will not be happy with the acceleration in headline inflation last month, it may take some heart from the gentle dip in the core rates. That said, the bottom line is still excessively strong underlying pressures which all but guarantee that key interest rates will be going up again on Thursday. Still, a 25-basis point increase now looks all the more likely. Today's update puts the Eurozone ECDI at 4 and the ECDI-P at 16 indicating that overall economic activity is running just a little stronger than market expectations.

Consensus for April's annual HICP flash is 7.0 percent, which would be up 1 tenth versus its final March reading, and 5.7 percent for the narrow core, which would be unchanged.

The flash harmonised index of consumer prices (HICP) provides an early estimate of the final HICP, but using just partial data. Changes in the index provide an estimate of inflation, as targeted by the European Central Bank (ECB). Final data are released a round two weeks later. 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. Two of these are made available in the flash report amongst which financial markets normally concentrate upon the narrowest which excludes energy, food, alcohol and tobacco.

The measure of choice in the Eurozone is the harmonized index of consumer prices (HICP) 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 Eurozone, 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.