By Charles Duxbury 

STOCKHOLM--Sweden's central bank left its main interest rate and bond- buying program unchanged on Thursday, saying its existing policies were supporting the economy and would lead to inflation moving closer to its 2% target.

The central bank, known as the Riksbank, said it would leave its main repurchase rate at a record low of minus 0.35%, and that its bond-buying target would be left at 135 billion Swedish kronor ($16.12 billion).

"Economic activity in Sweden is strengthening and inflation is showing a clear upward trend," the central bank said. "The Riksbank remains highly prepared to make monetary policy even more expansionary in the event of inflation prospects deteriorating."

Sweden's inflation rate has been below the Riksbank's target for three and a half years as an economic slowdown across Europe and, more recently, a falling oil price have kept consumer prices low.

Sweden's consumer-price index fell 0.1% in July, compared with a year earlier, which was a smaller drop than the central bank had forecast.

Early in July, the Riksbank made an unexpected cut to its main interest rate and expanded its bond-buying program in an effort to raise inflation, amid rising economic uncertainty triggered by the Greek debt crisis.

After the policy statement the Swedish krona strengthened against the euro, which fell to SEK9.40 from SEK9.45.

About half of the analysts in a survey by The Wall Street Journal had expected a rate cut on Thursday, and opinion remains divided ahead of the Riksbank's next meeting in October.

Nordea analyst Andreas Wallstrom said the Riksbank's inflation forecasts remain a bit too high, which suggests more easing should be expected even if the chance of it has now fallen slightly.

Handelsbanken analyst Andreas Skogelid said that while the market would continue to see a high likelihood of another cut in October or December, he thought rates would remain unchanged.

That would change if the European Central Bank reacts to a strong euro by easing its own policy and forcing the Riksbank to respond to prevent a strengthening of the krona, he said.

Write to Charles Duxbury at charles.duxbury@wsj.com

(END) Dow Jones Newswires

September 03, 2015 05:32 ET (09:32 GMT)