Consumer prices were surprisingly strong in August. A provisional 1.0 percent monthly rise was steep enough to boost the annual inflation rate from July's 4.3 percent to 4.8 percent, some 0.5 percentage points above the market consensus, its highest mark since May and its first increase since April.

The flash HICP was even stronger, rising fully 1.1 percent versus July to lift its yearly rate from 5.1 percent to 5.7 percent, now 3.7 percentage points above the ECB's target.

However, the monthly jump in the annual CPI rate was almost wholly attributable to energy where the inflation rate spiked from minus 3.7 percent at the start of the quarter to 6.8 percent. Elsewhere, the rate declined in manufactured products (3.1 percent after 3.4 percent) and in services (2.9 percent after 3.1 percent). Food (11.1 percent after 12.7 percent) similarly softened while tobacco (9.9 percent after 9.8 percent) was only marginally firmer. Consequently, the signs are that core inflation was much better behaved.

The August data make for some upside risk to the headline Eurozone inflation rate due later this morning, but it will be the core rates that matter more in determining what happens to ECB policy next month. Today's reports put the French ECDI at 13 and the ECDI-P at minus 9. In other words, while overall economic activity is running a little hotter than expected, the real economy is modestly underperforming.

The annual inflation rate is expected to be stable at July's final 4.3 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 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.