• Norway holds key rate at 2.0 percent
• Sweden among world's least corrupt nations

Sweden's central bank raised its benchmark interest rate by 0.25 points to 1.0 percent on Tuesday, the third increase since July as the country's economy makes a strong recovery from recession.

"The Swedish economy is growing rapidly," the central bank said, however warning "the strength of the recovery in the United States and Europe remains uncertain."

It said that although inflationary pressures in Sweden were currently low, they were expected to increase as the economy strengthens and the bank needed to raise the rate to keep its target inflation rate of 2.0 percent.

"The Swedish economy is developing well. The global recovery has contributed to an increase in world trade, which benefits Swedish exports," the bank said.

"A combination of public finances, a high level of household saving and optimism among households is creating the conditions for increasing consumption. The broad upswing in the Swedish economy is also contributing towards a rapid increase in employment," it added.

Along with its benchmark interest rate raise, the bank upped its economic forecast for this year to 4.8 percent and to 3.8 percent in 2011, among the highest expected growth levels in Europe.

In September, it had estimated growth would be around 4.1 percent this year and 3.5 percent next year.

The bank stressed that the economic recovery "could take a long time" in the United States and that fiscal policy tightening measures were "dampening growth in Europe."

As a result, it said it would review downwards its rate rise expectations.

"Developments abroad, together with the low inflationary pressures prevailing in Sweden during the forecast period, argue against the need to raise the repo rate as rapidly in the coming years," it said.

In raising its rate by 0.25 points from a historic low level of 0.25 percent in July, the central bank made Sweden the second western European country after Norway to raise interest rates since the beginning of the global recession which triggered rate cuts worldwide.

It then raised its key rate another 0.25 points to 0.75 percent in September.

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