Consumer prices were again on the weak side of expectations in September. A 0.3 percent monthly fall was 0.2 percentage points steeper than the market consensus and sharp enough to reduce the annual inflation rate from 1.1 percent to just 0.8 percent, its lowest reading since July 2021.

The monthly drop in the headline rate in part reflected a 0.2 percent slide in domestic prices although this left their annual rate unchanged at 2.0 percent. Import prices were down 0.5 percent, cutting their yearly rate from minus 1.9 percent to minus 2.7 percent.

Within the CPI basket, monthly declines in petroleum (3.6 percent), recreation and culture (1.5 percent) and restaurants and hotels (0.7 percent) stood out. A partial offset came from a seasonal bounce in textiles and clothing (4.0 percent). As a result, core prices fell 0.2 percent versus August, trimming the annual underlying inflation rate by a tick to 1.0 percent.

Just yesterday, newly installed SNB Chairman Martin Schlegel warned that risks to inflation were on the downside. Today's update is consistent with that view and must increase the likelihood of another cut in the central bank's policy rate in December. That said, the Swiss RPI (11) and RPI-P (29) remain in positive surprise territory showing economic activity in general still running slightly ahead of market expectations.

Prices are seen dipping 0.1 percent on the month, leaving the yearly inflation rate unchanged at just 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.