Prices rose a final monthly 0.3 percent in May, matching the provisional estimate and reducing the annual inflation rate from April's final 8.2 percent to 7.6 percent.

The monthly change in the flash HICP was similarly unrevised at also 0.3 percent but the yearly rate was trimmed a tick to 8.0 percent. This was 0.7 percentage points below its final April reading but still fully 6.0 percentage points above the ECB's target.

May's deceleration in the annual CPI rate was largely attributable to non-regulated energy where inflation fell from 26.6 percent to 20.3 percent. Other negative effects came from processed food (13.2 percent after 14.0 percent), transport services (5.6 percent after 6.0 percent) and non-energy industrial goods (5.0 percent after 5.3 percent). The main upward pressure came from unprocessed food (8.8 percent after 8.4 percent) and housing services (3.5 percent after 3.2 percent). Consequently, core inflation dipped from 6.2 percent to a downwardly revised to 6.0 percent.

Even so, underlying inflation remains sticky and far too high for the ECB. More generally, today's update puts the Italian ECDI at 12 but only due to strong prices. At minus 3, the ECDI-P shows that real economic activity is struggling to keep up with market expectations.

No revision is expected leaving a 0.3 percent monthly increase and a 7.6 percent annual inflation rate, the latter down from April's final 8.2 percent.

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 provide widely used measures of inflation. A provisional estimate, with limited detail, is released about two weeks before the final data are reported.

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 Italy 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, Italy's interest rates are set by the European Central Bank.

Italy like other EMU countries has both a national CPI and a harmonized index of consumer prices (HICP). Components and weights within the national CPI vary from other countries, reflecting national idiosyncrasies. The core CPI, which excludes fresh food, is usually the preferred indicator of short-term inflation pressures.

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.