0 Economy Recovers Swedish Bank Raises Interest

Economy Recovers Swedish Bank Raises Interest

Sweden's central bank raised its benchmark interest rate by 0.25 points to 0.75 percent, as the economy began to recover from recession.

"Sweden's economy continues to show strong growth," Riksbank said in a statement explaining his decision.

"Inflationary pressure is currently low, but is expected to increase as economic activity strengthened. Repo interest rate should be increased gradually to more normal levels to attain the inflation target of 2.0 percent and create the right conditions for stable growth in the real economy," he said.

The central bank said its forecast for how the key interest rate will evolve is still the same as the estimates given in July, predicting that interest rates will rise to 0.9 percent by the end of the year and gradually increased to 2.1 percent in the third quarter of next year.

Meanwhile the Riksbank raised its forecasts for economic growth in Sweden to 4.1 percent this year from an estimated 3.8 percent in July.

But for 2011, the bank said it expects Sweden's gross domestic product (GDP) will grow 3.5 percent, down from a previous estimate of 3.6 percent growth.

The increase in interest rates from the historic lows of 0.25 percent in July, the central bank made Sweden the second western European country after Norway to raise interest rates since the start of the global recession triggered rate cuts worldwide.