STOCKHOLM, June 14 (Reuters) -

Inflation in Sweden slowed in May, but underlying price pressures remained strong, leaving the central bank to weigh whether it needs to hike rates again at the end of this month or pause.

Consumer prices, measured with a fixed interest rate, rose 0.1% in May from the previous month and were up 6.7% from a year earlier, the statistics office (SCB) said on Wednesday.

The central bank targets 2% CPIF inflation. Analysts polled by Reuters had forecast annual headline inflation of 6.7%, down from 7.6% in the previous month.

The Riksbank's forecast was 7.1%.

Headline inflation has come down quickly in the last couple of months but underlying price pressures have proved more persistent.

Excluding volatile energy prices - a measure the Riksbank watches closely - inflation was 8.2% against 8.4% in April and a forecast from the Riksbank of 8.1%. That could tip the scales in favour of another hike on June 29.

"We therefore maintain our call that the policy rate will reach 4.0% by September," Swedbank said in a note.

The Swedish crown initially strengthened after the data but was trading roughly unchanged at 0645 GMT.

The Riksbank faces a tough balancing act. Some parts of the economy are doing well, but households and retail industries are struggling.

Growth both domestically and internationally is expected to slow and the effects of a year of rapid rate hikes has yet to be fully felt.

However, the currency is at its weakest level in more than a decade against the euro and would weaken further if the Riksbank fails to keep pace with the European Central Bank, which is expected to increase its key rate by a quarter percentage point on Thursday. A weaker currency would make the job of fighting inflation harder.

The U.S. Federal Reserve is expected to keep rates unchanged later on Wednesday, but underlying price pressures remain strong there, too.

At its most recent meeting in April, the Riksbank raised the policy rate by a half percentage-point to 3.5%. It forecast another quarter point hike either in June or in September.

Two of the five rate-setters wanted a smaller hike in April, arguing that would give the Riksbank more flexibility ahead.

Markets see rates peaking at around 3.9%.

(Reporting by Simon Johnson; editing by Niklas Pollard and Kim Coghill)