RTTNews - Thursday, the Swedish central bank left its key interest rate unchanged and decided to issue SEK 100 billion loans to banks at a fixed rate.

As expected, the Executive Board of the Riksbank maintained the repo rate at a record low of 0.25% and the rate is expected to remain at this low level until autumn 2010. The central bank said the interest rate needs to be low over a long period of time to support a stable recovery and to attain the 2% inflation target.

The central bank is of the view that supplementary measures are required to ensure the intended effect of monetary policy. So, the Executive Board decided to offer further loans of SEK 100 billion to the banks at a fixed interest rate and with a maturity of around one year. This could help in lowering interest rates on loans given to companies and households, the Riksbank added.

The minutes of the latest Executive Board meeting will be published on September 16.

The board noted increasing signs of a recovery, but this recovery is from a low level. Sweden has recorded stronger-than-expected growth in the second quarter and financial market situations continued to improve. But, the central bank said the future developments still remain uncertain.

With respect to the labor market, the board said it would lag behind and employment will not start to increase until 2011.

The central bank further raised the economic outlook and forecasts recovery in the next year. Now, the economy is estimated to shrink 4.9% this year, better than the 5.4% fall estimated previously. The 2010 GDP growth is seen at 1.9% compared to the 1.4% expansion estimated previously.

In July also, the Executive Board had decided to offer loans totaling SEK 100 billion to commercial banks at a fixed interest rate to ensure that monetary policy has the intended effect.

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