"The Bank of Finland has decided to cut the bank's tender rate from 3.25 percent to 3.10 percent. The decision is effective immediately," the central bank said in a statement.
"Behind the rate cut are a continued moderate inflation outlook, the narrowing spread between domestic and foreign market interest rates and the confidence shown towards the markka," it said.
The cut came after the markka hit four-month highs amid mounting speculation of an imminent link to the European Union's Exchange Rate Mechanism (ERM), possibly in connection with this weekend's meeting of EU finance and economy ministers in Dublin. Finland joined the EU in 1995.
"This was a surprise which I would link completely to the strengthening of the markka," said OKOBANK treasury economist Teijo Rantatupa. Economists said pressure on the currency to appreciate would continue despite the move.
"This will in no way help (weaken the markka), they should have taken off 50 basis points at once, this sort of shaving is not enough," said Rantatupa.
Merita Bank chief analyst Jukka Lepomaki said the cut had increased expectations that Finland would soon decide on whether to link the markka to the ERM, perhaps this weekend.
"From the market's view the important thing is that we could get back to business as usual: whether it would be wise to link the markka to the ERM is not important," he said. He saw a 3.00 to 3.02 near-term trading range for the markka against mark.
