Consumer prices moved in line with expectations in July. A 0.1 percent monthly dip matched the market consensus and trimmed the annual inflation rate from June's 1.7 percent to 1.6 percent, equalling its lowest reading since December 2021.

However, domestic prices were firmer, rising 0.2 percent to leave their yearly rate unchanged at 2.3 percent. Import prices were much weaker, falling fully 1.2 percent on the month and reducing their annual rate from minus 0.1 percent to minus 0.6 percent.

Within the CPI basket's major groups, clothing and footwear (minus 6.5 percent) fell steeply on the month courtesy of seasonal sales and alone subtracted nearly 0.2 percentage points. Both recreation and culture (minus 1.1 percent) and household goods and services (minus 0.8 percent) were also sharply lower but there was a sizeable rise in restaurants and hotels (1.3 percent) and, to a lesser extent, in food and soft drink (0.4 percent). Prices of petroleum products were up 0.3 percent. As a result, core prices (excluding unprocessed food and energy) fell 0.2 percent versus June which saw annual core inflation slip from 1.8 percent to 1.7 percent, matching its weakest mark since April 2022.

Overall, the SNB should be cautiously happy with today's data but it will note the stickiness of domestic prices. To this end, another hike in the policy rate next month remains a clear possibility despite the unexpected sluggishness of economic activity. The Swiss ECDI now stands at minus 21 and ECDI-P at minus 8.

A 1.6 percent annual rate is expected for July consumer prices which would compare with June's benign 1.7 percent rate.

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.