Sweden's central bank raises key interest rate by 0.25 percentage points to 1.75 percent

Sweden's central bank on Friday raised its key interest rate by 0.25 percentage points to 1.75 percent, saying the country's economic growth in 2005 was stronger than previously forecast.

The hike was expected after the bank hinted in December that it might soon raise the repo rate, the interest rate received or paid by banks on money deposited in or borrowed from the central bank for seven days.

The bank said new information since its December report indicated Sweden's gross domestic product had grown more than previously predicted.

"New statistics indicate that GDP growth was slightly stronger at the end of 2004 and beginning of 2005 than was previously estimated," the bank said in a statement.

"Several economic indicators also point to somewhat stronger growth than expected in the future. There may thus be justification for some upward revision of the forecasts for GDP growth in 2005 and 2006."

The bank cut the interest rate by half a percentage point in June 2005, saying economic growth in Sweden and in the euro zone had been slower than expected, the AP reports.

A.M.