Consumer prices continued to move in line with expectations in August. A 0.2 percent monthly gain matched the market consensus and left the annual inflation rate unchanged at July's 1.6 percent, equalling its lowest reading since December 2021.

Domestic prices were flat on the month, trimming their yearly rate from 2.3 percent to 2.2 percent. However, import prices climbed 0.8 percent to boost their annual rate from minus 0.6 percent to minus 0.3 percent.

Within the CPI, the main upward pressure came from petroleum products where prices rose a monthly 5.8 percent and alone added nearly 0.2 percentage points. A spike in clothing and footwear (3.2 percent) reflected seasonal factors but both household energy (0.5 percent) and other goods and services (0.5 percent) also posted solid gains. Partial offsets came from transport (minus 0.4 percent) and recreation and culture (minus 0.3 percent). As a result, core prices (excluding unprocessed food and energy) edged just 0.1 percent firmer, reducing the annual underlying rate from 1.7 percent to 1.5 percent, matching its weakest mark since March 2022.

Overall, the SNB should be quite happy with today's data. Both headline and core inflation have been below 2 percent since June and with the real economy clearly sluggish, pressure for another policy tightening this month is gradually diminishing. The Swiss ECDI now stands at minus 23 and ECDI-P at minus 34, both gauges signalling ongoing underperformance by economic activity in general.

A 1.6 percent annual rate is expected for August consumer prices which would match July's as-expected post.

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.