Sweden lowers key lending rate to 1.50 per cent

Feb 16, 2012, 9:06 GMT

Stockholm - Sweden's central bank cut its key lending rate by 25 percentage points to 1.50 per cent Thursday, citing weaker economic prospects due to developments abroad.

The board of governors of the Riksbank said slower growth in the single-currency eurozone had weakened demand for Swedish exports.

Amid the weaker economic outlook, households were saving more and postponing consumption, while companies were delaying investments, the central bank said.

The central bank expected the repo rate - the rate at which the central bank lends money to banks - to remain at its current level until next year.

Sweden is a member of the European Union, but does not use the euro currency.

The Riksbank said it projected Sweden's gross domestic product to grow by 0.7 per cent this year, while it expected inflation to remain low.

The rate cut was to take effect on February 22.