Sweden Cuts Repo Rate by 0.5%

The Swedish central bank Riksbank cut its repo rate by 0.5 percentage points to 0.5 percent to boost the country's production and employment.

The lower interest rate is necessary to "dampen the fall in production and employment" and to maintain the inflation target of2 percent, the Riksbank said in a statement.

The deterioration in global economic activity has hit Sweden hard, and the recent confidence indicators pointed to the economic downturn being even deeper than the Riksbank had forecast in February, it said.

The Riksbank said that GDP growth is expected to be positive but low in 2010, the labor market will lag behind and employment will not begin to rise until 2011.

The repo rate is expected to remain at a low level until the beginning of 2011, it said.

The repo rate would rise to 0.8 percent in the first quarter of2011 and to 3 percent by 2012, The Riksbank said.

In December, the Riksbank made a record rate cut of 1.75 percentage points. In February, the Riksbank halved its interest rate to 1 percent.