The Swedish central bank has raised its key interest rate by a quarter of a percentage point to 1.75 percent to keep inflation in check as the Swedish economy grows.

Though the Riksbank says underlying inflation is still low, it reckons it could spike higher as the employment market improves and salaries start rising.

It says both Swedish exports and domestic demand are "developing strongly."

Sweden's economy has rebounded quickly following the global recession. In the fourth quarter, GDP grew by 7.2 percent year-on-year, the biggest jump in the European Union.

Wednesday's rate increase is the sixth since July.

The Riksbank kept its forecast unchanged, saying it expects to raise rates to around 2.5 percent in the first quarter 2012, and 3.2 percent by early 2013.