The provisional consumer prices increased 0.2 percent on the month in June while annual inflation was 1.7 percent, up from May's final of 1.6 percent.

The HICP, which, unlike the CPI, accounts for seasonal factors like summer sales, provisionally increased 0.2 percent on the month. The annual rate was 1.7 percent, the same as May's final.

June's slight increase in annual CPI was largely due to higher rates of unprocessed food (from 3.5 percent to 4.2 percent), processed food including alcohol (from 2.7 percent to 3.0 percent), transport (from 2.6 percent to 2.9 percent) and durable goods (from minus 1.1 percent to minus 0.8 percent). This overshadowed the decrease in rates of regulated energy products (from 29.3 percent to 22.7 percent) and non-regulated energy products (from minus 4.3 percent to minus 4.6 percent).

June's annual core inflation, excluding volatile items like energy and fresh food, has increased to 2.1 percent, up from 1.9 percent in May.

Prices of groceries and unprocessed foods continue to increase, up 0.2 percent on the month and 3.1 percent on the year (from May's 2.7 percent).

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.