Sweden “on the brink of deflation”

The ICA supermarket chain is set to cut prices on certain food items by up to 7 per cent and competitors’ Coop and Axfood have announced that they too will cut prices.

With inflation at 0.0 per cent in January, a drop in food prices could result in deflation.

“If food prices do fall by 7 per cent, the average price cut could be as much as 1 per cent,” says SEB’s Henrik Mitelman.

Michael Grahn, chief economist at Danske Bank, believes the Riksbank will have to cut the benchmark rate in the near future.

This is despite the fact that several of the governors of the central bank have argued that there is no need, given the strong upswing in the economy and the fact that consumer debt is on the rise as a result of low interest rates.

Sources: Dagens Nyheter, Svenska Dagbladet, Dagens Industri


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