Inflation provisionally accelerated in November. A 0.3 percent monthly fall in prices was small enough to lift the yearly rate from October's final 2.0 percent to 2.3 percent, in line with the market consensus and a 3-month high. Having fallen below the target 2 months ago and matching its target the previous month, inflation now exceeds the 2.0 percent medium-term target.

The key core rates were better behaved. The narrowest gauge held steady at 2.7 percent, just short of forecasts, while the measure excluding just energy and unprocessed food edged just 0.1 percentage point firmer to 2.8 percent. Inflation in services dipped 0.1 percentage point to 3.9 percent while its non-energy industrial goods counterpart edged 0.2 percentage points higher to a still very soft 0.7 percent. Consequently, most of the boost to the overall rate came from energy (minus 1.9 percent after minus 4.6 percent).

Regionally, headline inflation rose only slightly in France (1.7 percent after 1.6 percent), but climbed much more sharply in both Spain (2.4 percent after 1.8 percent) and Italy (1.6 percent after 1.0 percent). Inflation remained stable in Germany (2.4 percent).

The acceleration in Eurozone inflation this month will not come as a surprise to the ECB which had already warned of some upside potential through year-end. Consequently, it should not prevent another cut in key interest rates in December. Even so, the November update probably means that key rates will be cut by 25 basis points rather than 50 basis points. Today's report nudges up the Eurozone RPI to minus 23 and lifts the RPI-P to minus 18. However, both gauges still show overall economic activity running behind market expectations.

Base effects are expected to lift Eurozone headline inflation with HICP up 2.3 percent and narrow core up 2.8 percent in the latest month versus 2.0 percent and 2.7 percent a month ago.

The flash harmonised index of consumer prices (HICP) provides an early estimate of the final HICP, but using just partial data. Changes in the index provide an estimate of inflation, as targeted by the European Central Bank (ECB). Final data are released a round two weeks later. 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. Two of these are made available in the flash report amongst which financial markets normally concentrate upon the narrowest which excludes energy, food, alcohol and tobacco.

The measure of choice in the Eurozone is the harmonized index of consumer prices (HICP) 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 Eurozone, 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.