For a second consecutive month, consumer prices were much stronger than expected in February. A 0.7 percent monthly increase was nearly double the market consensus and large enough to lift the annual inflation rate from 3.3 percent to 3.4 percent, its highest reading since last August.

Domestic prices were up 0.6 percent on the month, raising their yearly rate from 2.6 percent to 2.9 percent. The increase here was compounded by import prices which jumped fully 1.1 percent, although negative base effects meant that their annual rate still fell from 5.2 percent to 4.9 percent.

Within the CPI basket, significant contributions to the overall monthly rise came from food and non-alcoholic drink and clothing and footwear where prices advanced 1.1 percent and 3.7 percent respectively. Restaurants and hotels (1.6 percent) household goods and services (1.0 percent) and recreation and culture (1.3 percent) similarly posted solid gains. Petroleum products were only flat and there were no declines. As a result, core prices (excluding unprocessed food and energy) climbed fully 0.8 percent versus January, lifting the annual core rate by 0.2 percentage points to 2.4 percent, a new record high.

The broad-based acceleration in inflation in February probably all but guarantees another round of tightening from the SNB later this month. It also boosts the Swiss ECDI to 32 but with the ECDI-P at just minus 6, overall economic outperformance is wholly attributable to upside surprises on prices.

A 3.1 percent annual rate is expected for February consumer prices which would compare with 3.3 percent rate in January, a result that was much higher than expected.

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.