* Prices dip 0.2 pct m/m, confound forecast for no change
* Inflation expected to turn positive in coming months
* SNB capped franc to fight deflation and recession
ZURICH, Jan 11 Swiss consumer prices dropped
more than expected in December as costs for medicine, package
trips, oil, and clothing fell, reinforcing the Swiss National
Bank's case for maintaining a cap on the Swiss franc against the
Prices fell 0.4 percent from a year ago, the same drop as
recorded in November, and were down 0.2 percent from the
previous month. Analysts had forecast flat prices on the month.
"Even though the distorting effects from the rise in the
Swiss franc are fading out, we're still waiting for positive
inflation rates. We are, however, expecting inflation rates to
turn positive in coming months," VP Bank economist Bernd
Seeking to prevent deflation and a recession, the SNB capped
the franc at 1.20 per euro in September 2011 after investors
seeking a safe haven from the euro zone crisis had pushed the
Swiss currency from one record high to another.
The central bank lowered its near-term outlook for inflation
at its quarterly policy review last month, predicting prices
would fall 0.1 percent in 2013 and rise just 0.4 percent in
2014, far below the SNB's 2 percent threshold for price
"Giving up the exchange rate floor is not on the agenda (of
the SNB) so there is no inflation pressure from the exchange
rates," VP Bank's Hartmann said.
"On the whole, the economy is only slowly picking up speed,
meaning we will not see high inflation rates in 2013."
(Reporting by Katharina Bart and Silke Koltrowitz; Editing by