Sweden’s central bank on Thursday raised interest rates to 4.5 per cent, their highest level in 12 years, and said further increases were likely this year to bring inflation back from the current 4 per cent to within the bank’s target of 2 per cent.

The Riksbank is tackling the same conundrum faced by other central banks – rising prices and slowing growth. It said Sweden’s above target inflation was due to energy and food prices, but added high domestic resource utilisation had also contributed.