Prices were unrevised in the final data for December. A 0.2 percent monthly increase matched the provisional estimate and left the annual inflation rate at 0.6 percent, down from November's final 0.7 percent.

The final HICP was similarly unrevised and so also still shows a 0.2 percent monthly gain for a 0.5 percent yearly rate, down from 0.6 percent.

December's deceleration in the annual CPI rate was largely attributable to regulated energy products (minus 41.6 percent after minus 34.9 percent), recreation (3.6 percent after 4.6 percent) and processed food (4.9 percent after 5.8 percent). By contrast, non-regulated energy products (minus 21.5 percent after minus 22.5 percent) were slightly firmer as was unprocessed food (7.0 percent after 5.6 percent). Consequently, core inflation fell again, from 3.6 percent to an unrevised 3.1 percent.

Underlying HICP inflation (3.0 percent after 3.3 percent) continues to decline which should sit well with the ECB. However, it remains well above the 2 percent target, helping to rule out any early ECB interest rate cut. Today's report puts the Italian ECDI at minus 4 and the ECDI-P at 6. Broadly speaking, overall economic activity is nearing much as expected.

No revisions are expected to the provisional data leaving a 0.2 percent monthly rise in prices and a 0.6 percent annual inflation rate, down from November's final 0.7 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.