Inflation was unrevised in October. With base effects again negative, a final zero monthly change in prices matched the provisional estimate and left the annual inflation rate at 3.8 percent, down from September's final 4.5 percent. The latest reading equalled the lowest mark since July 2021.

The flash HICP was similarly unrevised with a final 0.2 percent drop on the month that put its yearly rate at 3.0 percent, down from 4.3 percent in September and only 1 percentage point above the ECB's target.

The fall in the annual CPI rate was largely attributable to goods where inflation slumped from 5.0 percent to 3.6 percent. Within this, energy (minus 3.2 percent after 1.0 percent) and food (6.1 percent after 7.5 percent) both had a negative effect. Even so, with services (3.9 percent after 4.0 percent) also edging lower, the core rate dropped again, from 4.6 percent to an unrevised 4.3 percent.

Today's update confirms the surprisingly sharp decline in headline inflation reported last month and, more importantly, a tidy drop in the underlying rate too. Indeed, at 4.2 percent, the narrow core HICP rate has fallen more than 2 percentage points since August. More generally, both the German RPI and RPI-P now stands at exactly zero, meaning that overall economic activity is performing just as the forecasters predicted.

Prices are not expected to be revised leaving a flat monthly change and a 3.8 percent annual inflation rate, down from September's final 4.5 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 Germany 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, Germany's interest rates are set by the European Central Bank.

Germany 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. The preliminary release is based on key state numbers which are released prior to the national estimate. The states include North Rhine-Westphalia, Baden-Wuerttemberg, Saxony, Hesse, Bavaria and Brandenburg. The preliminary estimate of the CPI follows in the same day after the last of the state releases. The data are revised about two weeks after preliminary release.

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.