STOCKHOLM, Sept 25, 2024 (BSS/AFP) - Sweden's central bank said Wednesday it was lowering its key interest rate by a quarter point and said it envisioned another two cuts this year as inflation subsides.

Cutting its rate to 3.25 percent, the Riksbank said in a statement that "if the outlook for inflation and economic activity remains unchanged, the policy rate may also be cut at the two remaining monetary policy meetings this year".

"A cut of 0.5 percentage points is possible at one of these meetings," the bank said.

It also said it now forecasted one or two cuts in the first half of 2025.

"The policy rate is thus expected to be cut at a clearly faster pace than was previously communicated, which contributes to stronger economic activity and an inflation rate close to the target," the bank said.

In late August, official data showed that Sweden's gross domestic product contracted by 0.3 percent in the second quarter compared to the first quarter, when it grew 0.7 percent.

The Riksbank made its first rate cut in eight years in May.

It left it unchanged a month later, but has since communicated an accelerated easing of its monetary policy.

After a series of rate hikes aimed at reining in inflation, Sweden's interest rate had been held at four percent since September 2023, its highest level since 2008.

Swedish inflation fell to 1.9 percent in August year on year, down from 2.6 percent in July.

Meanwhile, the inflation measure used by the Riksbank to guide monetary policy, CPIF -- which is adjusted for interest rates -- was 1.2 percent year-on-year in August, well below the central bank's two-percent target.