The Swedish Riksbank’s planned hike of the repo rate may be put off as consumer prices increase slower than expected.

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Sweden's inflation rate was 1.2 percent in March compared to a year ago and unchanged since February.

"It was even below our expectations, and we were quite low this time”, Roger Josefsson at Danske Markets said in written comment.

According to a SME Direkt poll market-watchers had forecast a yearly increase of 1.4 percent and a 0.5 percent increase compared to February.

Sweden's economy last year suffered its largest annual setback in more than half a century as gross domestic product dropped 4.9 percent compared to 2008, which is the largest annual fall since World War II.

Central bank governor Stefan Ingves said last month that “the economic recovery is now resting on more solid ground” and echoed the Riksbank’s intentions to hike its key interest rate this summer. But that may be too hasty.

“From an economic perspective, we are seeing a narrowing divergence with the Riksbank forecast on CPIF. We've said that they will hike in September, and may hike in July, but this should put the odds more in favour of a September hike. Much of the data points in the wrong direction for a rate hike so soon", Roger Josefsson wrote in a comment quoted by Reuters.

Interest costs for owner occupied housing are still lower than a year ago and had a large impact on the inflation rate. Clothing, shoe, vegetable and fuel prices were the biggest contributors to the rise in inflation.