RTTNews - Thursday, Sweden's central bank or the Riksbank lowered its key interest rate by 0.25 percentage point to 0.25% and said the rate is expected to remain at this low level over the coming year.

The central bank said in a statement that a lower repo rate and repo rate path are needed to counteract the fall in production and employment and to attain the inflation target of 2%. The Riksbank added that its assessment is that cutting the rate to 0.25% will not threaten the functioning of the financial markets. The bank also cut the deposit rate to minus 0.25% and the lending rate to 0.75%.

In addition, the Executive Board of the Riksbank decided to offer loans totaling SEK 100 billion to commercial banks at a fixed interest rate and with a maturity of 12 months to ensure that monetary policy has the intended effect. This should contribute to lower interest rates on loans to companies and households, the central bank said.

Further, the Riksbank revised its outlook for the economy. The bank now expects the economy to contract 5.4% in 2009, down from a 4.5% shrinkage seen in April. In 2010, gross domestic product or GDP is forecast to rise 1.4%, up from an earlier prediction of 1.3% growth. Consumer prices are anticipated to fall 0.2% this year and then to grow by 1.4% next year. The bank said there are several signs that economic activity will improve.

The minutes of the Executive Board's monetary policy discussion will be published on July 16. The decision on the repo rate will apply with effect from Wednesday, 8 July.

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