STOCKHOLM (AP) — Sweden's central bank on Wednesday raised its key interest rate, saying inflation "is still far too high and underlying inflation has been much higher than expected."

Riksbanken raised its policy rate by half a percentage point to 3.5% and added that it will "probably" be raised further by a quarter-point in June or September.

"The high inflation affects in particular households that have small margins to begin with, but the development is negative for the whole economy," the central bank said in a statement.

Annual inflation last month hit 10.6%, down from 12% in February.

"Low and stable inflation is a necessary condition for good economic development. It is important for confidence in the inflation target that inflation falls clearly this year," the bank said. "With the monetary policy conducted, inflation is expected to fall back this year and to stabilize close to 2% during 2024."

Following Wednesday's increase, the policy rate is at the highest level since October 2008, the Swedish news agency TT wrote.

Central banks around the world have been raising interest rates to combat inflation that has started to ease in many countries but is still painfully high, squeezing households and businesses. Despite the collapse of two U.S. banks that stirred global financial turmoil last month, the U.S. Federal Reserve, European Central Bank and others still hiked rates to take aim at price spikes.