Special Report:Global Financial Crisis
STOCKHOLM, Dec. 4 (Xinhua) -- Sweden's central bank Riksbank decided Thursday to cut its key interest rate by a bigger-than-expected 1.75 percentage points to 2 percent.
Previously, the bank has never cut the rate by more than half a percentage point at a time, analysts said.
The Riksbank explained in a statement that a large reduction in the interest rate is necessary to dampen the fall in production and employment and to meet the inflation target of 2 percent.
A much lower interest rate is needed to counteract economic developments being too weak and inflation being too low, the statement added.
The Riksbank expected that the new interest rate may in principle remain at the level over the coming year.
The country's national statistics agency (SCB) announced last week that Sweden had fallen into recession in the third quarter, when its economy shrank 0.1 percent.
The central bank also lowered its forecast for Sweden's 2009 gross domestic product growth to a negative 0.5 percent from a positive 0.1 previously.
It is the third interest rate cut by the Riksbank since October when the bank twice slashed its interest rate by half a percentage point at a time to 3.75 percent.
