ZURICH (Reuters) - Swiss consumer price inflation picked up slightly more than expected in February on the back of higher rents and the cost of energy and fuel, supporting speculation that a rise in interest rates is not far off.

Swiss inflation remains low by international standards as the strong franc dampens price increases for imported oil and food products, giving the Swiss National Bank leeway to hold rates unchanged at its March 17 meeting.
But the franc jumped on Wednesday’s data as they boosted expectations that the SNB may raise borrowing costs in June.
Consumer prices rose 0.4 percent compared with January, taking the annual inflation rate in February to 0.5 percent, the Federal Statistics Office said. Analysts had expected the annual rate to tick up to 0.4 percent from 0.3 percent in January.
But solid investment growth and a promising outlook for consumption have added to rising price pressures and could lift core inflation further down the line.
“This should keep the SNB on its toes although it should have sufficient time to avoid a rushed reaction at the upcoming meeting on March 17,” Stephan said.
The KOF Swiss Economic Institute’s survey of economists showed the Swiss economy on a solid footing.
The 22 economists raised their average growth forecast for 2011 to 2 percent from 1.7 percent in the previous quarterly poll after 2.6 percent growth in 2010.
The SNB forecasts growth of some 1.5 percent for 2011 but is widely seen presenting a more optimistic view on March 17, which would reinforce expectations for an earlier rate cut.
Core inflation, which strips out volatile price components like food or energy and fuel, ticked up to 0.1 percent in February. Prices for domestic goods rose 0.6 percent on the year, while costs for import products were up 0.3 percent.
The SNB is widely expected to keep its target for the 3-month franc LIBOR at 0.25 percent next week as a rate hike may further boost the franc, which is still trading close to record highs and is giving exporters a headache.
But the European Central Bank’s tough talk on inflation last week led markets to reconsider the rate outlook for Switzerland and increase bets on a first post financial crisis hike in June.
SNB policy makers have said recently that rates had to rise in the medium term to secure price stability after a raft of upbeat news underscored the healthy state of the Alpine economy.
The SNB’s gauge for underlying inflation -- so called dynamic factor inflation which takes into account developments on the labor and financial market -- hit its highest since August 2008 in February, according to the SNB’s monthly report.
In December, the SNB forecast a breach of its 2 percent inflation threshold in the third quarter of 2013.