The acceleration in flash inflation was confirmed in the final report. Prices were only flat on the month but this was still enough to lift the yearly inflation rate from June's final 2.5 percent to 2.6 percent, matching its reading in May. The headline rate stands 0.6 percentage points higher than its medium-term target.

The key core rates were also unrevised, leaving the narrowest measure again unchanged at 2.9 percent, and the broader measure excluding just energy and unprocessed food steady at 2.8 percent. Services posted a 0.1 percentage point dip to 4.0 percent, still high but at least a 3-month low, while the non-energy industrial goods rate was flat at just 0.7 percent. Energy (1.2 percent after 0.2 percent) provided a modest boost but food, alcohol and tobacco (2.3 percent after 2.4 percent) edged lower.

Regionally, headline inflation rose in France (2.7 percent after 2.5 percent), Germany (2.6 percent after 2.5 percent) and Italy (1.6 percent after 0.9 percent) but fell again in Spain (2.9 percent after 3.6 percent).

The final July report will leave financial markets guessing about the outcome of the September ECB meeting. Key to the decision will be trends in the core rates, which remain disappointingly high, and services, where inflation is still double the target. The flash data for August (due next week) will be key. However, with the Eurozone RPI (minus 18) and RPI-P (minus 32) both sub-zero, the real economy would welcome any reduction in borrowing costs.

No revisions are expected leaving a 2.6 percent annual inflation rate, up from June's final 2.5 percent, and a 2.8 percent narrow core, unchanged from last time.

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.