Sweden's central bank has cut its key interest rate by a quarter of a percentage point to 1%.

Inflationary pressures remain benign and problems in Europe are weighing on the Scandinavian country's economy. Today's decision was widely expected.

The Riksbank also said its main interest rate will likely "remain at this low level for the coming year" due to the economic slowdown, rising unemployment and subdued inflation.

By the end of 2013, it expects inflation to start edging up as the global economic recovery gathers steam, partly on the back of recent measures taken by the 17 EU countries that use the euro to get a grip on their three-year debt crisis.

The Riksbank said the weaker European economy has so far had "a clear effect" on Sweden.