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 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.

“Inflation is low and evidence is mounting that inflation will stay low for foreseeable future, not least as wage increases are moderating and the krona has strengthened,” said Torbjoern Isaksson, chief analyst at Nordea Bank AB, in a note. “As the Riksbank seem to focus less on short-term inflation trends and emphasizes risks associated with household indebtedness, the Riksbank will probably not cut rates in April.”

The krona gained 0.15 percent to 8.3215 per euro as of 10:03 a.m. in Stockholm.

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.

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