Swedish prices fell by 0.4 percent in May on a 12-month basis, after a drop of 0.1 percent in April, Statistics Sweden said in a statement on Thursday.

Lower interest rates and a fall in the cost of home repairs were the key drivers behind the deflation, the statement said.

From April to May, however, consumer prices rose by 0.1 percent owing to the increase in petrol prices, according to Statistics Sweden.

Sweden experienced several months of strong inflation last year before tailing off rapidly.

In September, inflation was as high as 4.4 percent year-on-year.

Sweden's central bank has set itself an inflation target of 2.0 percent year-on-year.

Deflation can hamper economic growth because it reduces businesses profits and discourages investment.

It also leads consumers to put off buying goods in the hope that prices will continue to fall.