By Dominic Chopping

STOCKHOLM--Sweden's central bank on Tuesday kept its key interest rate unchanged at zero and backed its earlier guidance that the rate will likely remain unchanged at least until late 2023.

The Riksbank said the Swedish economy seems to have left the acute crisis it found itself in during the spring and has started to recover slightly faster than expected, but noted that the way back is long and fraught with uncertainty.

To provide support to economic developments and help inflation rise toward the 2% target, the Riksbank said it will continue to make asset purchases and offer liquidity within all of the programs it has launched so far this year.

The Riksbank had already specified that it would purchase 20 billion Swedish kronor ($2.26 billion) in government bonds and SEK65 billion in covered bonds from Oct. 1 until Dec. 31.

The labor market is worrying, with high unemployment as a result of the sharp decline in economic activity in the spring, and while inflation has been slightly higher than expected in recent months, it is still projected to be low this year, the central bank noted.

"Extensive economic policy support will be needed for a long time, from both fiscal and monetary policy," it said.

The Riksbank reiterated it could still lower the repo rate further if it is deemed an effective measure, particularly if confidence in the inflation target were to be threatened.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

September 22, 2020 04:29 ET (08:29 GMT)

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