Inflation was unrevised in February. A 2.6 percent final annual rate matched its flash estimate and so remains the second lowest since July 2021. The trend has been solidly down since peaking at 10.6 percent in October 2022 and the headline rate is now just 0.6 percentage points above its medium-term target.

Core inflation was similarly unrevised. The narrowest measure was down 0.2 percentage points versus January at 3.1 percent, its lowest post since March 2022. Excluding just energy and unprocessed food, the rate dropped a steeper 0.3 percentage points to 3.3 percent. Elsewhere, inflation in non-energy industrial goods decreased from 2.0 percent to 1.6 percent and it also declined sharply in food, alcohol and tobacco (4.0 percent after 5.6 percent). Energy (minus 3.7 percent after minus 6.1 percent) provided another boost and, significantly, services (4.0 percent) were revised a tick firmer to stand unchanged versus January.

Regionally, headline inflation was lower in most member states, including France (3.2 percent after 3.4 percent), Germany (2.7 percent after 3.1 percent), Italy (0.8 percent after 0.9 percent) and Spain (2.9 percent after 3.5 percent).

The final February data should sit pretty well with the ECB and will underpin speculation that a cut in ECB interest rates is not very far away. Still, most Governing Council members will want to see further progress in the core rate and some additional softening in inflation in services. Today's report also puts the Eurozone RPI at 5 and the RPI-P at exactly zero. Economic activity in general is performing much as expected.

No revisions are expected leaving a 2.6 percent annual headline inflation rate and a 3.1 percent narrow core, the former down from January's final 2.8 percent and the latter from 3.3 percent.

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.