Sweden's central bank on Tuesday cut its key interest rate to a national record low of 1.50 per cent, the first reduction within a major European country in the face of faltering economic growth.

The bank also slashed its 2005 economic growth forecast to 1.9 per cent from a 3.2 per cent and said it expected Swedish consumer prices to rise 0.3 per cent this year instead of the 0.1 per cent rise it had previously predicted.