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Swedish prices show surprise deflationary dip: official data

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(Globalpost/GlobalPost)

Swedish consumer prices fell by 0.1 percent in October from the level a year earlier, Statistics Sweden said Tuesday, surprising economists and the Swedish central bank.

Prices fell by 0.2 percent from the level in September after three months of consumer price increases.

This was the 12th month running with an inflation rate of 0.1 percent or less, including a 0.5-percent fall in April.

Sweden is not a member of the eurozone, for which the European Central Bank decided on November 7 to lower its key interest rate to 0.25 percent in a disinflation climate.

"Today's low inflation clearly puts pressure on Riksbank (Sweden's central bank) to cut" the interest rates, Nordea bank economist Andreas Wallstroem said on Twitter.

Sweden's central bank had predicted a consumer price increase of 0.4 to 0.5 percent for October.

The Swedish central bank has kept the key interest rate at 1.0 percent since last December, creating a debate among its members.

Most of them consider it very low, but a minority thinks it should be cut to stimulate activity and prices so as to meet the official inflation goal of 2.0 percent.

Central bankers are usually nervous if inflation is steadily much below 1.0 percent because this can be a sign that the economy is slipping dangerously towards a climate of falling prices, or deflation, which can set in motion a vicious cycle of falling demand, rising unemployment, and further price falls.

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http://www.globalpost.com/dispatch/news/afp/131112/swedish-prices-show-surprise-deflationary-dip-official-data