Inflation provisionally held steady in April. A 0.6 percent monthly rise in the final HICP matched its flash reading and left the annual rate also unchanged at March's final 2.4 percent. This was in line with its lowest mark since July 2021 and still just 0.4 percentage points above its medium-term target.

However, there was more good news on the core. The narrowest measure dipped an unrevised 0.2 percentage points to 2.7 percent, equalling its weakest print since January 2022. Moreover, excluding just energy and unprocessed food, the rate dropped fully 0.3 percentage points to 2.8 percent. Elsewhere the picture was also pleasantly reassuring. Inflation in non-energy industrial goods was confirmed at 0.9 percent, down from 1.1 percent and, more importantly, the previously sticky rate in services declined 0.3 percentage points to 3.7 percent. This was the latter's lowest reading since June 2022. Energy (minus 0.6 percent after minus 1.8 percent) provided another boost and food, alcohol and tobacco (2.8 percent after 2.6 percent) similarly offered a small lift.

Regionally, headline inflation was flat in France (2.4 percent) and fell in Italy (0.9 percent after 1.2 percent) but rose in both Germany (2.4 percent after 2.3 percent) and Spain (3.4 percent after 3.3 percent). Belgium (4.9 percent after 3.8 percent) was top of the ladder and Lithuania (unchanged at 0.4 percent) bottom.

The final April data will further underpin speculation that the ECB will deliver a 25 basis point cut in key interest rates next month. Today's report puts the region's RPI at 32 and the RPI-P at 43, both values showing economic activity in general running well ahead of market forecasts.

No revisions are expected to the provisional data, leaving the yearly core rate at 2.7 percent, down from March's final 2.9 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.