STOCKHOLM: Sweden's economy grew at the fastest pace in more than three years in the fourth quarter, presenting the Riksbank with a conundrum of whether to cut rates further to battle deflation.
The Swedish crown strengthened 5 ore to 9.35 crowns versus the euro on the news, an unwelcome rise for the central bank which hopes a weak currency will help raise prices.
The economy grew 1.1 percent in the fourth quarter from the previous three month period and rose 2.7 percent from a year earlier, the highest yearly increase since the third quarter 2011.
That compared with expectations for a 0.5 percent rise on the quarter and 1.5 percent on the year, according to a Reuters poll. The previous quarter was also revised upwards.
The figures highlighted the uncommon situation in Sweden's economy where the central bank earlier in February introduced negative interest rates, launched a bond buying programme and said it was ready to do more at short notice to battle falling prices and push up inflation expectations.
"On the margin, this suggests the Riksbank does not need to do more," SEB analyst Olle Holmgren said, adding that the higher GDP figures does not mean inflation will take off.
"The Riksbank's focus now is on inflation expectations and CPI," he said.
Data released earlier this month showed consumer prices continued to fall in January.
Separately on Friday, retail sales also came in stronger than expected and increased 5.1 percent in January from a year earlier compared with expectations for a rise of 3.8 percent.
Also in neighbouring Denmark, fresh data showed GDP overshot expectations, growing 1.3 percent on the year.
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