Consumer prices again surprised on the downside in April. A flat monthly performance was well short of the market consensus and with base effects negative, soft enough to trim the annual inflation rate from 2.9 percent to 2.6 percent, its lowest reading since April 2022.

Domestic prices fell 0.1 percent on the month, easing their yearly rate from 2.7 percent to 2.6 percent. Import prices rose 0.2 percent but this still saw their annual rate slide from 3.8 percent to 2.4 percent.

Within the CPI basket, monthly gains in clothing and footwear (1.8 percent), household goods and services (0.9 percent) and recreation and culture (also 0.9 percent) were essentially offset by falls in food and soft drink (0.9 percent), restaurants and cafes (0.5 percent) and housing and energy (0.2 percent). Petroleum products were down 1.4 percent. As a result, core prices (excluding unprocessed food and energy) rose 0.2 percent, in line with its February increase and also leaving the annual core rate at 2.2 percent, matching a 4-month low.

Despite the unexpectedly sharp deceleration in headline inflation last month, the sticky core is likely to ensure that the SNB retains a tightening bias. That said, anything more than a 25 basis point increase in the central bank's policy rate in June looks all the less likely. Today's update leaves both the Swiss ECDI (minus 36) and ECDI-P (minus 30) well below zero and so indicative of underperforming economic activity in general.

The annual inflation rate is seen at 2.8 percent in April, down a tick versus March.

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.