Eurozone consumer prices rose by 0.5 percent in August, below the initial estimate and consensus forecast of a 0.6 percent increase.

That takes the annual increase in HICP to 5.2 percent, down from 5.3 percent in July, and below the consensus forecast and previously reported result of 5.3 percent.

That leaves the eurozone RPI at minus 25, compared to minus 20 previously, while the RPI-P remained steady at minus 39.

Core prices excluding energy, food, alcohol and tobacco increased by 0.3 percent in August, confirming the initial estimate and the consensus forecast. This left the narrow core annual rate at 5.3 percent, down from 5.5 percent in August.

Food prices continued to ease, recording no month-over-month change in August (below the initial report of a 0.1 percent increase), with the year-over-year pace slipping to 9.7 percent (lower than the initially estimated 9.8 percent rise), down from 10.8 percent in July.

The downward revision to the flash estimate could provide support for the more dovish members of the European Central Bank's governing council. Earlier on Tuesday, Francois Villeroy de Galhau governor of the Banque de France -- told BFM TV that rates could remain at current levels for as long as it takes to tame inflation, suggesting that he does not advocate further hikes.

Chief Economist Philip Lane speaks in New York on Thursday, while President Christine Lagarde is due to deliver a lecture earlier that day.

No revisions to the flash data are expected leaving a 5.3 percent annual headline rate, matching the final July print, and also a 5.3 percent narrow core, down from 5.5 percent last time.

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.