Consumer prices were slightly stronger than expected at year-end. A flat monthly performance was enough to lift the annual inflation rate from 1.4 percent to 1.7 percent, fully reversing the 0.3 percentage point decline seen in November.

The stable monthly performance masked a 0.3 percent increase in domestic prices that lifted their yearly rate from 2.1 percent to 2.3 percent. The gain here was offset by a 0.7 percent decline in import prices although this too was enough to lift their 12-month rate from minus 0.6 percent to minus 0.2 percent.

Within the CPI basket, the largest increase was in restaurants and hotels where prices jumped 1.8 percent. Household goods and services were also up 0.9 percent. On the downside, the steepest decline was in petroleum products (3.9 percent) ahead of food and soft drinks (0.7 percent) and clothing and footwear (0.5 percent). As a result, core prices (ex-food and energy) rose 0.2 percent versus November, nudging the underlying inflation rate just a tick higher to 1.5 percent.

Inflation trends in Switzerland remain soft and at 1.5 percent the core rate should not be an issue for the SNB. Even so, the central bank will note the acceleration in domestic prices which should help to ensure that it will be in no rush to cut its policy rate. Meantime, the December data put the Swiss RPI at 14 and the RPI-P at 35. Both values show Swiss economic activity running somewhat hotter than expected at the end of 2023.

Prices are seen dipping 0.1 percent on the month to nudge the annual inflation rate a tick higher to 1.5 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.