Consumer prices were much weaker than expected at the start of the year. A 0.2 percent monthly rise was fully 0.3 percentage points less than the market consensus and small enough to trim the annual inflation rate from 1.7 percent to just 1.3 percent, matching its lowest reading since September 2021.

The fall in headline annual inflation in part reflected a 0.6 percent increase in domestic prices that reduced their yearly rate from 2.3 percent to 2.0 percent. This was compounded by a 1.3 percent decline in import prices that lowered their 12-month rate from minus 0.2 percent to minus 0.9 percent.

Within the CPI basket, the largest monthly increase in prices was in restaurants and hotels (1.7 percent) followed by housing and energy (1.1 percent) and alcohol and tobacco (0.9 percent). Gains here were partially offset by decreases in clothing and footwear (7.8 percent) which were sharply weaker on seasonal sales, and transport (0.9 percent). Petroleum products (minus 1.7 percent) were also significantly cheaper. As a result, core prices (ex-food and energy) dropped 0.3 percent versus December, shaving the underlying inflation rate from 1.5 percent to 1.2 percent, the weakest post since January 2022.

The surprisingly soft January update will boost speculation that the SNB might be the first of the major central banks to cut policy rates next month. Both headline and core inflation have been sub-2 percent every month since May 2023. Meantime, today's update puts the Swiss RPI at minus 21 and the RPI-P at minus 5. In other words, undershooting overall economic activity is also just due to unexpected weakness in prices.

Prices are expected to rise 0.5 percent on the month, trimming the yearly inflation rate by a tick to 1.6 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.