Consumer prices were revised a little softer in the final data for March. A flat monthly performance was 0.1 percentage point less than the provisional estimate and reduced annual inflation to 1.2 percent, now 0.4 percentage points above February's final mark.

The final HICP shows an unrevised 1.2 percent rise on the month but the yearly rate was trimmed a tick to also 1.2 percent, up from February's 0.8 percent but still some 0.8 percentage points below the ECB's target.

March's increase in annual CPI inflation was largely attributable to non-regulated energy (minus 10.3 percent after minus 17.2 percent), regulated energy (minus 13.8 percent after minus 18.4 percent) and transport (4.5 percent after 3.8 percent). On the downside, there were falls in unprocessed food (2.6 percent after 4.4 percent) and tobacco (1.9 percent after 2.6 percent). Consequently, core inflation was unchanged from its February mark at a downwardly revised 2.3 percent.

March's acceleration in inflation in Italy will not cause the ECB any sleepless nights. The narrow core CPI rate has declined every month since last September and at 2.2 percent is now just a couple of ticks above target. Today's update puts the Italian RPI at minus 32 and the RPI-P at minus 25, both measures showing a moderate degree of overall economic underperformance versus market expectations.

No revisions are expected leaving a 0.1 percent monthly rise in consumer prices and a 1.3 percent annual inflation rate, down from February's final 1.8 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.