Sweden's central bank, Riksbank, raised its interest rate by a full percentage point to 1.75 percent on Tuesday in a surprise move and warned that more was to come as it sought to get to grips with surging inflation.

The hike was the biggest since November 1992, when the Riksbank also raised its key rate by a full percentage point.

"Inflation has become higher than in the Riksbank's previous forecast in June, and it is expected to rise further during the year," the Riksbank said in a statement.

(With input from Reuters)