Swedish Annual Consumer Prices Decline as Krona Strengthens

Swedish consumer prices declined in February from a year earlier after the krona strengthened, easing pressure on interest rates as the largest Nordic economy revives.

Consumer prices fell an annual 0.2 percent, after being unchanged the prior month, Statistics Sweden said today. That was in line with an estimate in a Bloomberg survey of 12 economists. Prices rose 0.4 percent in the month. Adjusted for mortgage costs, price gains slowed to an annual 0.9 percent, which was higher than the estimated 0.8 percent.

Price pressures are limited in the largest Nordic economy as rising unemployment has capped wage increases and a surging krona pushes down import prices. The krona is the best performing major currency this year as policymakers including Riksbank Governor Stefan Ingves have signaled they are unconcerned about its ascent. It’s up 7 percent against the euro over the past 12 months.

Sweden has low resource utilization, moderate wage increases and no upward pressure from import prices because of the strong krona,” Elisabet Kopelman, an analyst at SEB AB in Stockholm, said before the release. “We don’t think CPI inflation will reach the central bank’s 2 percent target this or next year.”

Economic growth slowed to 0.8 percent last year from 3.7 percent in 2011, while unemployment will rise to an average 8.1 percent this year from 7.7 percent in 2012. The Riksbank predicts it will start raising its main lending rate next year as economic growth picks up to 1.2 percent this year and 2.7 percent in 2014.

To contact the reporter on this story: Johan Carlstrom in Stockholm at jcarlstrom@bloomberg.net.

To contact the editor responsible for this story: Jonas Bergman in Stockholm at jbergman@bloomberg.net

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