Swedish consumer prices index, or CPI, rose 0.9% year-on-year in August, slower than 1.1% increase in the previous month, Statistics Sweden said Thursday. Economists had expected an increase of 1%.

During the month, interest costs for owner occupied housing were still lower than a year ago and had a downward impact on the inflation rate.

On a monthly basis, the CPI remained unchanged in August. Economists were expecting a 0.1% increase. Compared to the sharp increase in July, air travel costs decreased 20.9% in August. Prices for package holidays also decreased 7.1% during the month.

The annual inflation rate for the CPIF or the core consumer price index was up 1.4% in August, while economists expected a 1.5% rise. Month-on-month, the CPIF remained flat as expected by economists.

At the same time, the CPIX rose 1.1% annually and was flat compared to the preceding month. Similarly, the harmonized index of consumer prices, or HICP, rose 1.1% year-on-year in August and decreased 0.1% compared to the previous month.

The Swedish central bank has raised the interest rates by a quarter point to 0.75%, citing higher exports and falling unemployment. The Swedish economy grew 4.6% annually in the second quarter and recorded a 1.9% growth compared to the first quarter.

The Riksbank raised its 2010 growth forecast for the Swedish economy to 4.1% from 3.8%, noting strong domestic economic conditions.