Money Matters - Simplified

Riksbank cuts interest rates

Stockholm -- Sweden's Riksbank cut its repo rate 0.5 percentage points to 0.5 percent Tuesday, citing a decline in economic conditions.

"The deterioration in global economic activity has hit Sweden hard," the bank said in a statement.

The bank noted a "substantial" drop in exports, a rapidly declining labor market and "weak" consumer spending.

A lower rate was needed "to counteract production and employment being too weak and to attain the inflation target of 2 percent," the bank said, noting rates would "remain at a low level until the beginning of 2011."

Deeper rate cuts, however, were unlikely as further cuts "could have negative effects on the functioning of the financial markets," the bank said.

The repo rate is the discount rate a central bank uses to purchase government securities from commercial banks.

Copyright 2009 by United Press International.

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