Stockholm  - Sweden's Central Bank said Thursday it will keep its interest rate at a record-low 0.25 per cent, despite signs that the economy is picking up.

However, the recovery is from "a low level" and keeping the rates unchanged aims at contributing to a "stable" recovery, the Central Bank said in a statement.

Positive signs cited by the Riksbank were that gross domestic product (GDP) grew slightly more than expected in the second quarter.

The financial markets also showed improvement but were still not normal, the bank said.

The Central Bank also said it would offer loans worth 100 billion kronor (13.9 billion dollars) to the commercial banks at a fixed interest rate in order to help secure favourable loans to commercial business and households.

The Riksbank projected that GDP would decline by 4.9 per cent this year, but grow 1.9 per cent in 2010 and 3.2 per cent in 2011.

Three of the six governors had reservations. Deputy governor Lars Svensson wanted to cut the repo rate to zero per cent while deputy governors Lars Nyberg and Barbro Wickman-Parak supported keeping the rate at 0.25 per cent but made a reservation over the growth forecasts, the Riksbank added.

Sweden has been hit hard by the global economic downturn and exports have fallen. The bank forecast that the interest rate would remain low over the coming year and did not expect the labour market to improve until 2011.

The latest rate cut was announced in July - the latest in a row reducing the interest rate from 4.75 per cent in September 2008.

Sweden is a member of the European Union but is not in the single-currency eurozone. (dpa)