STOCKHOLM - THE Swedish central bank said on Thursday it had decided to slash its key interest rate by 1.75 percentage points to 2.0 per cent to 'dampen the fall in production and employment' due to the global financial crisis.

'A much lower repo rate and repo rate path are needed to counteract economic developments being too weak and inflation being too low,' the Riksbank said in a statement.

'The fact that the interest rate needs to be cut substantially is also due to monetary policy not having such a large impact recently as it normally does,' it said, adding that 'after this, the repo rate may in principle remain unchanged over the coming year.' The rate reduction is the third since Oct 8. -- AFP