Sweden’s central bank has raised its key interest rate by 0.25% on the basis that the country’s economy is performing better than previously forecast. The bank had signalled in December that that was likely. It is the first increase since 2002 and is intended to keep the lid on inflation as growth accelerates in Sweden. The Swedish rate is now 1.75%.
The European Central Bank raised its key interest rate in December to 2.25%, the first rise in five years. The Bank of England left its rate unchanged at 4.5% for a fifth month running earlier this month. Inflation in Sweden is increasing as consumer and corporate spending surged. In December it was 1.2%, the fastest annual pace in more than a year. Last month, the Stockholm based central bank said the country’s economy will expand 3.2% this year, compared with 2.4% last year.
Now it say new information since its December report indicated Sweden’s gross domestic product had grown more in 2005 than previously estimated. And the bank’s economists added in a statement that several economic indicators also point to somewhat stronger growth than expected in the future. It said there may therefore be justification for some upward revision of the forecasts for GDP growth in 2005 and 2006. Analysts said another interest rate increase may come as soon as next month.