Stockholm - Sweden's central bank said Tuesday it was to cut its interest rate by half a percentage point to 0.50 per cent, saying the move was "necessary to dampen the fall in production and employment."

One of the six governors on the Riksbank board, Lars O Svensson, wanted a greater cut to 0.25 per cent, and "entered a reservation," the central bank said in a statement.

The Riksbank governors said Sweden has been hit "hard" by the global financial dowturn.

"Exports fell substantially towards the end of last year. The situation in the labour market has deteriorated rapidly and household consumption is weak," the board said.

The Riksbank governors said they did not rule out further cuts although the repo rate is at a such a low level. The low rates were expected to be in place until early 2011.

The cut was to take effect Wednesday, the Riksbank said.

The bank's board of governors said the inflation target of 2 per cent remained.

In February, the Riksbank halved its interest rate to 1.00 per cent.

Sweden is a member of the European Union but not in the euro zone. (dpa)