Sweden's central bank cuts interest rate to boost inflation

The Swedish central bank set its key interest rate further into negative territory on Thursday, citing unpredictable currency growth and worries over the debt crisis in Greece.

The Riksbank dropped its repo rate by a tenth of a percentage point to -0.35 percent, the bank said in a statement, and extended its bond-buying program by a SEK 45 billion (5.3 billion U.S. dollars).

"Inflation is rising and economic activity in Sweden is continuing to strengthen. But uncertainty abroad has increased and it is difficult to assess the consequences of the situation in Greece," the bank wrote.

The bank also said the Krona had grown more than expected since April and continued to pose a threat to Swedish inflation.

The Riksbank reported underlying inflation of 1 percent in May, short of its stated 2 percent target, which the bank said Sweden would reach by the end of 2015.

"In the euro area, economic activity is strengthening, but the events in Greece over the past few days have substantially increased the uncertainty. The consequences of the situation in Greece for the euro area as a whole and for Sweden are difficult to judge," the bank wrote.

Among its other fears was the Krona's strength against several other currencies, which could raise the price of imported goods and curb inflation.

In February, the Riksbank set a negative interest rate for the first time. The bank refused on Thursday to rule out further measures to tackle the threat of deflation.

"The Riksbank still has a high level of preparedness to make monetary policy even more expansionary if necessary, even between the ordinary monetary policy meetings," it wrote. (1 U.S. dollar = 8.45 SEK) Endit