Credit: REUTERS/INTS KALNINSBenchmark CPIF inflation 1.3% yr/yr
Riksbank and market forecast 1.5%
Strengthens doubts about c.bank rate hike plan
Swedish crown weakens sharply against euro
Adds currency reaction, detail, background
STOCKHOLM, Sept 10 (Reuters) - The already meager pace of Swedish inflation slowed unexpectedly in August, data showed on Tuesday, casting doubt on the central bank's plans to hike the benchmark rate around the end of the year and hitting the crown currency.
Consumer prices, measured with a fixed interest rate, fell 0.4% from the previous month and were up 1.3% from the same month last year, the statistics office (SCB) said.
The Riksbank had forecast CPIF inflation at 1.50% in line with analysts' expectations in a Reuters poll. The central bank targets 2% CPIF inflation.
CPI inflation fell 0.4% on the month and was up 1.4% on the year.
Sweden's economy has started to slow after years of strong growth and the downbeat inflation figures will strengthen scepticism over the Riksbank's plans - repeated only last week at its most recent meeting - to tighten policy around the end of the year.
"We see a rate cut around the turn of the year as the next move from the Riksbank, rather than a rate hike as signaled by the bank," analysts at banking group Nordea said in a note.
The Swedish crown was around 6 ore weaker against the euro after the inflation data. EURSEK=
Many analysts were already convinced that the effects of a trade spat between the United States and China and uncertainty surrounding Britain's exit from the European Union would outweigh rate-setters' desire to move away from negative rates.
Those have been in place since early 2015 and, should there be a deep downturn, the Riksbank will be left with little ammunition to stimulate the economy.
The European Central Bank could add further pressure if it goes ahead with additional easing as it is expected to do later this week. That could result in a stronger crown and more downward pressure on inflation. EURSEK=
GRAPHIC: Sweden inflation: http://tmsnrt.rs/2eahojm
GRAPHIC: Riksbank rate, inflation and the Krona: http://tmsnrt.rs/1qEN4Rz
Sweden inflation:http://tmsnrt.rs/2eahojm
Riksbank rate, inflation and the Krona:http://tmsnrt.rs/1qEN4Rz
(Reporting by Simon Johnson; editing by Niklas Pollard)
((simon.c.johnson@thomsonreuters.com; +46 8 700 1045; Reuters Messaging: simon.c.johnson.reuters.com@reuters.net))
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