Sweden's central bank raised its main interest rate by 0.25 points to 0.5 per cent on Thursday, a move which had been widely expected, and raised its 2010 growth forecast for the Swedish economy to 3.8 per cent.
"The Swedish economy is developing strongly following the severe downturn. The repo rate now needs to be raised gradually towards more normal levels to attain the inflation target of two per cent and to ensure stable growth in the real economy," the Riksbank said in a statement.
The central bank also significantly increased its economic growth forecast for this year to 3.8 per cent, up from 2.2 per cent predicted in may, and said Sweden's gross domestic product (GDP) would grow 3.6 per cent in 2011.
The central bank's main interest rate had been at a historic low of 0.25 per cent since the beginning of July 2009, or exactly one year.