There were no surprises in the provisional data for May. Consumer prices rose 0.2 on the month, matching the market consensus and leaving the annual inflation rate unchanged from April's 0.8 percent.

The flash HICP followed suit, similarly increasing 0.2 percent on the month to trim its yearly rate from 0.9 percent to also 0.8 percent, now 1.2 percentage points below the ECB's target.

May's stable CPI inflation rate masked falls in processed food (2.1 percent after 2.5 percent) and transport services (2.6 percent after 2.8 percent) that were offset by gains in non-regulated energy (minus 13.5 percent after minus 13.9 percent), regulated energy (0.0 percent after minus 1.3 percent) and unprocessed foods (2.3 percent after 2.2 percent). Consequently, core inflation again edged a tick lower to 2.0 percent.

The provisional May report leaves Italy close to the bottom of the Eurozone inflation ladder and still no significant threat to the ECB's inflation target. The data also put the Italian RPI at minus 15 and the RPI-P at minus 9. Overall economic activity is modestly underperforming market expectations.

Prices are forecast to rise a monthly 0.2 percent after a 0.1 percent increase in the final April data.

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.