Tuesday, the Swedish central bank reduced its key interest rate by 50 basis points to a record low.

The Riksbank, considered the world's oldest central bank, said in a statement that the Executive Board has decided to cut the repo rate by 0.5 percentage points to 0.5%.

According to the central bank, lower interest rate and interest rate path are necessary to dampen the fall in production and employment and to attain the inflation target of 2%. The central bank expects the repo rate to remain at a low level until the beginning of 2011.

The latest rate cut will take effect from April 22. The deposit rate was cut to 0% and the lending rate to 1%.

Further, the Riksbank announced that its deputy governor Lars Svensson entered a reservation against the latest decision and advocated a cut in the repo rate to 0.25%. The policymaker also sought an interest rate path where the repo rate is kept at this low level for a longer period of time, some quarters into 2011.

The minutes of the latest rate-setting session will be published on May 5.

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