Reuters - (For a Reuters live blog on U.S., UK and European stock markets, click LIVE/ or type LIVE/ in a news window)

* Bank stocks set to outperform European sectors for the month

* Fed expected to raise interest rates by 75bps on Wednesday

* Swedish c.bank surprises with full percentage point rate hike (Adds comments, details; updates prices throughout)

By Shreyashi Sanyal

Sept 20 (Reuters) - European shares edged higher on Tuesday, boosted by banks, while expectations of another large interest rate hike by the U.S. Federal Reserve kept risk-taking bets in check.

The pan-European STOXX 600 index added 0.1%, after a soft start to the week, with banks climbing 1.6% by 0759 GMT as lenders tend to benefit from a high interest rate environment.

The U.S. central bank will likely deliver its third straight super-sized 75 basis point interest rate hike on Wednesday, toughening its stance on persistent inflation.

Swedish stocks fell 0.5% after the Riksbank hiked interest rates by a full percentage point to 1.75% in a surprise move and warned that more was to come as it sought to get to grips with surging inflation.

Markets will also be watching the Bank of England's policy decision, split on whether it will hike by 50 or 75 bps on Thursday.

"It's all about central banks this week and it looks like the traders are actually pricing in both the Fed's rate hike and the interest rate hike from the Bank of England," said Erik-Jan van Harn, macro strategist at RaboResearch.

The European Central Bank had earlier in the month raised its lending rate by 75 bps, which has helped the banks outperform every other sector with gains of over 7% so far in September.

Investors also watched for any new developments in the ongoing energy crisis in Europe amid the stoppage of Russian natural gas supply, prompting many governments to plan measures to overcome a cold winter ahead.

German utilities RWE and Uniper got closer to striking long-term deals to buy liquefied natural gas (LNG) from Qatar's North Field Expansion project to help replace Russian gas, three sources familiar with the matter told Reuters.

Shares of RWE rose 0.3%, while Uniper dipped 0.2%. The utilities index gained 0.1%.

Shares of Bachem Holding soared 9.0%, to the top of the STOXX index, after the Swiss biotech supplier signed two new contracts for peptides.

In Germany, data showed producer prices rose in August at their strongest rate since records began both in annual and monthly terms, driven mainly by soaring energy prices.

"We had a huge spike in natural gas prices which made the difference in PPI numbers and then we saw many European energy companies just rushing to stockpile reserves before the entrance for this winter," RaboResearch's van Harn said. (Reporting by Shreyashi Sanyal and Johann M. Cherian in Bengaluru; Editing by Sriraj Kalluvila and Savio D'Souza)