Swiss inflation increased at a higher than expected rate in February, data showed on Monday, increasing the probability the Swiss National Bank will raise interest rates this month.

Consumer prices increased last month by 3.4% year on year, up from 3.3% in January, and well above the SNB target range for price stability, defined as annual prices increasing by 0-2%.

The central bank is due to announce its latest interest rate decision on March 23, with the market seeing a 91% probability of a 50 basis point increase from the current level of 1%.

The SNB declined to comment on Monday on the latest data.

The year-on-year increase in inflation was more than economists expected, with Credit Suisse anticipating a rate of 2.9%, UBS and J.Safra Sarasin both expected a rate of 3.0%.

Prices were 0.7% higher month-on-month due to rising rents and more expensive petrol.

Core inflation, which strips out volatile items like fuel and food, showed prices were 0.8% higher compared with January and 2.4% higher compared with February 2022.

The persistence of inflation makes the SNB very likely to raise rates later month said economists, especially following recent weakening of the Swiss franc, which has helped limit price rises from costlier imports.

"I think a 50 basis point rates increase in March is nailed on especially after this reading," said Karsten Junius, an economist at J.Safra Sarasin.

"We currently expect the SNB to raise rates 25 basis points in June, but if inflation remains high, we cannot rule out a 50bp increase."

Credit Suisse economist Maxime Botteron said the SNB would not just look at the February data when deciding its next move, but rate increases were likely.

"Swiss inflation is still too high for the SNB and it indicated last December it will likely raise rates again this year, so we are confident it will raise rates by 50bp in March and another 25bp in June,” said Botteron. (Reporting by John Revill; Editing by Robert Birsel)