The Riksbank, Sweden's central bank, announced its decision to raise the main interest rate by 0.25 percentage points to 4.5 percent on Thursday.
In a statement, the Riksbank said it expected the repo rate to average at 4.5 percent for the third quarter of this year and 4.8 percent for the year's final quarter.
It also predicted the rate would reach 4.9 percent for the third quarter of 2009 and 4.6 percent for the same quarter in 2010,before dropping back to 4.4 percent in the third quarter of 2011.
"Inflation has continued to rise in Sweden and is now at its highest level since the mid-1990s. Over the year the repo rate will need to be raised further on a couple of occasions to prevent the high inflation rate from becoming entrenched," the bank said in the statement.
The country's inflation forecast has been adjusted upwards, with consumer prices expected to rise by 3.9 percent this year, 3.5 percent in 2009 and 2.3 percent in 2010.
According to the bank's statement, the main reason for the high inflation is that energy and food prices in the world market have increased remarkably, coupling with the rising use of domestic resources in recent years.
The bank has also revised its growth forecast for Sweden, projecting 2.1 percent of GDP growth for this year, 1.2 percent in 2009 and 2.7 percent in 2011.
Source: Xinhua
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