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Swedish Consumer Prices Unexpectedly Climb as Krona Weakened

Aug. 13 (Bloomberg) -- Sweden’s consumer prices unexpectedly rose in July after the krona weakened, cooling pressure on the central bank to lower interest rates.

Consumer prices rose an annual 0.1 percent after declining 0.1 percent the prior month, Statistics Sweden said today. Prices were estimated to remain unchanged, according to a Bloomberg survey of 14 economists. They fell 0.1 percent in the month. Adjusted for mortgages, price gains accelerated to an annual 1.2 percent from 0.9 percent. They fell a monthly 0.1 percent by that measure.

“Today’s figure combined with the decent data we’ve seen during the summer for the Swedish economy supports the case that the Riksbank won’t cut rates further,” said Andreas Wallstroem, an analyst at Nordea Bank AB in Stockholm. Inflation will continue to pick up as economic “growth accelerates towards the end of the year,” he said.

Sweden’s central bank last month said it will keep its main lending rate at 1 percent for at least another year to boost demand as a recession in Europe is fueling unemployment. Inflation will average 0.1 percent this year and 1.3 percent in 2014, it said. The Riksbank will announce its next two rate decisions on Sept. 5 and Oct. 24.

The krona gained 0.3 percent against the euro to 8.6593 as of 10:25 a.m. in Stockholm, after sliding 4.1 percent in the three months through June.

Sweden’s Finance Minister Anders Borg last week said the country’s labor market will remain weak through 2014 as economic hurdles persist. He warned risks to Sweden’s export-reliant economy are “high” as the situation in Europe remains fragile.

“There’s still a challenging situation for the Swedish economy,” Borg said. “We must try to protect the economy and inject more energy.”

Sweden is vulnerable to developments abroad as it exports about half of its output. Some 70 percent of that goes to Europe which is in a recession.

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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