Swedish Central Bank Raises Key Interest Rate

Sweden's central bank has raised its key interest rate by a quarter of a percentage point to 1 percent due to expectations that inflation will increase as economic activity picks up.

The central bank says that to stabilize inflation near its target of 2 percent, the key interest rate needs to be raised gradually.

The Riksbank on Tuesday said the Swedish economy is developing strongly, but since the recovery pace in both the United States and Europe is uncertain, the Nordic country's repo rate is not expected to be lifted "so much in the coming years."

The hike is the third since July. Before that, the Riksbank had kept the repo rate unchanged at 0.25 for two years, after making several sharp cuts in the autumn of 2008.