Amid the highest inflation rate hitting the country since 1991 of 9.0 recorded in August, the central bank of Sweden announced on Tuesday an interest rate hike of 1 percentage point, the biggest since 1993.

In a statement, Sweden's Riksbank said, “The development of inflation going forward is still difficult to assess and the Riksbank will adapt monetary policy as necessary to ensure that inflation is brought back to the target.”

Sweden's Riksbank warned that inflation is too high stating, “Rising prices and higher interest costs are being felt by households and companies, and many households will have significantly higher living costs,” adding that it would be even more painful for Swedish households if inflation remains at such high levels.

The bank also announced that the rate "will continue to be raised in the coming six months" and now expects the economy to shrink by 0.7% next year.

Earlier, the Swedish statistics agency revealed that power costs were up 29% in August. Energy prices have been driving other costs of living upward, also leading food prices to rise for nine months in a row.

Sweden, which has the highest gasoline prices in Europe, announced a temporary tax decrease in March as part of a $1.5 billion package of measures.

Central Banks worldwide have been battling against high inflation rates, as factors such as rising energy prices and Covid residual imbalances have been pressing the economies with no signs of relief in the short-term.

Read more: Swedish right coalition parties set to form gov. after elections win