"Mixed economic signals could complicate upcoming wage negotiations", Swedbank said in a report about the economy.

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"After the strong economic recovery last fall, we have seen a slightly slower expansion in recent months. The unusually cold weather probably had something to do with it, but at the same time there are signs that the rapid expansion the Swedish economy experienced in 2010 is tailing off.

"Mixed economic signals, together with continued high unemployment, could complicate upcoming wage negotiations. Despite showing restraint during the crisis years, Sweden will probably have little leeway to increase wages in the years immediately ahead due to its relative competitive weakness. In addition, high unemployment among groups that haven’t yet gained a foothold in the job market would limit increases in the minimum wage.

"To no one's surprise, the Riksbank raised its benchmark rate from 1.25% to 1.50% in February while revising the repo rate path upward. This means that the Riksbank expects that its benchmark rate, and interest rates in general, will have to be raised faster than before. At the same time January's inflation was significantly lower than forecast and together with low inflation pressure from wages points to a slower rate of increase than the repo rate path would suggest. Its fiscal strength gives Sweden the option of taking further measures to reduce the high unemployment.

Highlight: The Swedish Economy, 2/2011: Swedbank