Consumer prices were just slightly firmer than expected in February. A 0.6 percent monthly rise was only a tick above the market consensus and small large enough to trim the annual inflation rate from 1.3 percent to just 1.2 percent, matching its lowest reading since October 2021.

The dip in headline annual inflation in part reflected a 0.5 percent increase in domestic prices that reduced their yearly rate from 2.0 percent to 1.9 percent. This was compounded by a 1.0 percent rise in import prices that lowered their 12-month rate from minus 0.9 percent to minus 1.0 percent.

Within the CPI basket petroleum products were up 2.6 percent versus January and clothing and footwear 3.7 percent. Restaurants and hotels (1.3 percent) were also strong. On the downside, there were falls in food and soft drink (0.4 percent), healthcare (0.1 percent) and the other goods and services category (0.2 percent). As a result, core prices (ex-food and energy) climbed 0.7 percent on the month but negative base effects ensured the underlying inflation rate still eased from 1.2 percent to 1.1 percent, the weakest post since January 2022.

Despite being a little firmer than forecast last month, both headline and core inflation have remained below 2 percent every month since May 2023. The SNB will find it increasingly hard to justify keeping its policy rate at 1.75 percent later this month. Today's update puts both the Swiss RPI and RPI-P at exactly zero, meaning overall economic activity is now running just as financial markets expected.

Prices are seen rising 0.5 percent in the month, further reducing the annual inflation rate from 1.3 percent to 1.1 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.