Consumer prices were significantly weaker than expected in March. A flat monthly performance undercut the market consensus by fully 0.3 percentage points and trimmed the annual inflation rate from 1.2 percent to 1.0 percent, its lowest reading since September 2021.

The drop in annual inflation in part reflected a 0.2 percent fall in domestic prices that reduced their yearly rate from 1.9 percent to 1.8 percent. This was compounded by a 0.7 percent rise in import prices that lowered their 12-month rate from minus 1.0 percent to minus 1.3 percent.

Within the CPI basket the main upward pressure on the monthly change came from clothing and footwear, where prices rose 3.4 percent, and recreation and culture (1.4 percent). However, gains here were essentially offset by falls in restaurants and hotels (1.4 percent) and household goods and services (0.8 percent). As a result, core prices (ex-food and energy) edged 0.1 percent higher to reduce the underlying yearly inflation rate from 1.1 percent to just 1.0 percent, the weakest post since January 2022.

The March data are surprisingly soft and will bolster speculation that the SNB might cut its policy rate again in June. They also lower the Swiss RPI to minus 32 and the RPI-P to minus 20. Overall economic activity is once again falling quite well short of market expectations.

Prices are expected to rise 0.3 percent on the month, lifting the yearly inflation rate from 1.2 percent to 1.4 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.