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Swedish Consumer Prices Fall More Than Estimated on Krona Effect

May 14 (Bloomberg) -- Swedish consumer prices fell more than estimated in April as a strengthening krona last month killed inflation in the largest Nordic economy.

Prices dropped an annual 0.5 percent after being unchanged the prior month, Statistics Sweden said today. Prices were seen falling 0.2 percent, according to the median estimate in a Bloomberg survey of 16 economists. Prices fell 0.2 percent in the month. Adjusted for mortgage costs, the inflation rate slowed to an annual 0.5 percent from 0.9 percent.

Sweden’s central bank last month delayed plans for monetary tightening after cutting its inflation forecasts, citing the strong krona and companies’ inability to pass on price increases. The bank signaled it’s likely to keep the repo rate at 1 percent until the second half of 2014.

“We continue to see lower inflation in 2014, also after the substantial downward revision” said Olle Holmgren, an analyst at SEB AB in Stockholm, in a note to clients. “Low wages and a gradually stronger krona are projected to keep inflation well below 2 percent year-on-year throughout 2014.”

SEB predicts the Riksbank will cut rates to 0.75 percent at its next meeting in July.

Sweden sells about half its $500 billion output abroad, of which about 70 percent goes to Europe. The krona has strengthened almost 5 percent against the euro over the past year as investors sought refuge from the debt crisis raging further south.

The Riksbank last month cut its inflation forecast to an average 0.1 percent from 0.4 percent this year. It predicted consumer prices won’t rise more than its 2 percent target until December next year. It will announce its next rate decision along with updated economic forecasts on July 3.

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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