In line with expectations, consumer prices fell 0.2 percent on the month in December. This saw the yearly inflation rate slide from 3.0 percent to 2.8 percent, its third decline in the last four months and its lowest reading since last April.

Domestic prices rose 0.1 percent on the month, lifting their 12-month rate from 1.8 percent to 1.9 percent. However, the increase here was more than offset by import prices which dropped 1.1 percent, reducing their yearly rate from 6.3 percent to 5.8 percent.

Within the CPI basket, the largest downward effect on the overall monthly change came from transport where prices fell 1.1 percent and alone subtracted more than 0.1 percentage point. However, most other categories also posted declines leaving just restaurants and hotels (1.7 percent) to show the only increase of any real size. Even so, this was enough to see core prices (excluding unprocessed food and energy) edge 0.1 percent firmer, nudging the annual underlying rate a tick higher to 2.0 percent.

Today's update increases the likelihood of inflation having peaked but the SNB will note that the core rate accelerated in both November and December and stickiness here will ensure that the central bank retains a tightening bias. The Swiss ECDI (minus 8) and ECDI-P (minus 3) continue to show limited overall economic underperformance versus market expectations.

Prices are seen falling 0.2 percent on the month to reduce annual inflation from 3.0 percent to 2.9 percent.

The consumer price index (CPI) is an average measure of the level of the prices of goods and services bought for the purpose of consumption by Swiss households. Monthly and annual changes in the CPI provide widely used measures of inflation. The policy target measure for the Swiss National Bank (SNB), the annual CPI rate can be distorted by swings in prices amongst the more volatile subsectors and the CPI excluding fresh food and energy is used as a better guide to underlying short-term trends. Although not a member of the Eurozone, a harmonized index of consumer prices (HICP), measured according to Eurostat's procedures, is also published alongside the CPI.

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. 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 loans to 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 CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.