Consumer prices fell 0.1 percent in August, led by declines in package tours abroad, hotel stays, and air travel which offset increases for home rentals, clothing and shoes. Compared to a year ago, prices rose 0.2 percent. Excluding fresh and seasonal foods, energy, and fuel, core inflation also fell 0.1 percent on the month, although rising at a faster annual pace of 0.7 percent.

Prices for domestic and imported goods each fell 0.1 percent, with the former rising 0.6 percent year-on-year and the latter falling 1.3 percent, showing how the strong Swiss franc is keeping inflation at bay.

Consumers paid 0.3 percent less for food and alcoholic beverages in August, with prices falling 0.5 percent year-on-year. Prices for foreign package tours fell 2.4 percent in August and were down 2.2 percent from a year ago.

Rental costs which make up around 15 percent of the CPI rose a modest 0.1 percent in August and 1.8 percent year-on-year while owner equivalent rent was up 0.6 percent monthly and 2.1 percent year-on-year. Price developments could also prompt a reduction in the reference rate for home rental costs, allowing occupants to request a lowering of their rent and utility costs.

Goods inflation was flat in August and down 1.6 percent from a year ago with a 2.8 percent month-on-month rise in semi-durable goods offset by a 0.4 percent drop in non-durables and 0.2 percent contraction for durable goods. Services prices were down 0.2 percent in August and 2.1 percent cheaper than a year ago.

Clearly there are no inflationary pressures in Switzerland at the moment, giving the Swiss National Bank more than enough leeway to cut official rates into negative territory when it meets later this month.

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.