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By Daniel James Hayden IV

Sweden's central bank raised its repurchase rate 25 basis points to 2% on Tuesday in a move to keep its growing economy from overheating and driving inflation higher.

The move by the Riksbank was widely expected, and is the seventh straight time that Sweden's central bank has raised interest rates in an effort to keep inflation at a desirable rate of around 2%.

To meet this goal, Sweden's central bank expects that its future rate hikes will result in an average repurchase rate of 2.9% during the 3rd quarter of 2012 and an average repurchase rate of 3.4% in the 3rd quarter of 2013. Although Sweden is a member of the European Union, it never adopted the euro as its official currency.

By joining the European Union without adopting the euro, Sweden has received most of the economic benefits of being a member of the EU, while maintaining control over its monetary policy. This has allowed the country to have a more flexible monetary policy than the eurozone countries, which has helped keep Sweden's inflation at manageable levels while allowing its economy to grow.

Although the past year has been full of bad news from struggling European economies like Greece, Portugal and Spain, Sweden has one of the best performing economies in Europe and continues to grow at a healthy pace. While some European countries have seen their borrowing costs climb and even face the possibility of default because of years of poor fiscal planning, Sweden has benefited from its combination of sound fiscal management and flexible monetary policy.

Even as its currency climbs higher compared to the troubled euro, the country's economy continues to grow at a pace that most other industrialized nations could only dream of at this point.The Swedish economy grew at a brisk pace of 5.7% last year and Sweden's central bank expects that the 2011 growth rate will be at a lower but still enviable rate of 4.4%.

There are a few investment options for traders who would like to profit from Sweden's economic good fortunes. Investors who believe that the Swedish economy will continue to outshine its European peers should take a look at the iShares MSCI Sweden Index Fund (NYSEARCA:EWD).The iShares MSCI Sweden Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the Swedish market.

Well-respected international companies like LM Ericsson Telephone Company (NASDAQ:ERIC) and Volvo are among the fund's holdings. Because of Sweden's growing economy and sound fiscal management, the Swedish krona is rising in value compared to other currencies like the euro.As uncertainty in the eurozone and the United States causes investors to look for other safe haven investments, the krona could receive more attention from investors.

The CurrencyShares Swedish Krona Trust (NYSEARCA:FXS) is an investment option for those who see the Swedish krona as an alternative to the US dollar and the euro.

Source: How to Profit From Sweden's Booming Economy