Preliminary estimates indicate that consumer inflation will rise modestly in June. The Italian consumer price index saw a marginal rise of 0.1 percent month-over-month. Compared to June last year, the index showed growth of 0.8 percent, matching May's year-over-year rate.

The steady annual growth of the index masks divergent trends: prices for unprocessed foods dropped from 2.2 percent to 0.4 percent; services related to recreation, including repair and personal care, saw a slight decrease from 4.3 percent to 4.0 percent; durable goods prices fell further from minus 0.7 percent to minus 1.1 percent. Conversely, non-regulated energy products prices rose from minus 13.5 percent to minus 10.3 percent. And regulated energy products saw an uptick from 0.7 percent to 3.6 percent, while processed food (including alcohol and tobacco) climbed from 1.8 percent to 2.2 percent.

The rate of change for the Italian harmonized index of consumer prices was 0.2 percent on a month-over-month basis and 0.9 percent annually, up from 0.8 percent in May.

Recent inflation trends in Italy over the past three months indicate a moderate inflationary environment, suggesting stable economic conditions relative to other Euro area countries experiencing higher inflation rates.

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.