Sweden's central bank surprised markets today by keeping its key interest rate unchanged at -0.25%, saying it was finally seeing a rise in inflation and strong economic growth.

Markets had widely expected a cut further into negative ground. 

The bank also announced a five-fold increase in its government bond purchasing programme, buying bonds with an additional 40-50 billion kronor (€4.3 to 4.5 billion). 

"The expansionary monetary policy is having a positive impact on the Swedish economy and inflation has begun to rise," the bank said in a statement. 

The Riksbank has been trying to kick-start inflation since it stalled at the end of 2012, and has kept the repo rate in negative territory since February. 

A majority of economists questioned by Bloomberg had expected the bank to cut the interest rate further today, since Sweden's inflation of 0.2% in March was far below the bank's target of 2%.

The bank predicted strong Swedish economic growth for 2015, raising its forecast by a half-point to 3.2%. 

"GDP growth in Sweden is good and the labour market is continuing to improve," the bank said, noting that "the recovery in the euro area appears to be on firmer ground."