* Sees buying bonds most natural path if rate cuts exhausted
* Extraordinary measures not needed yet
* Analysts see no further cuts or extraordinary measures
By Simon Johnson
STOCKHOLM, May 5 (Reuters) - Sweden's central bank would probably buy government bonds as a first measure if it runs out of room to cut interest rates to boost the economy, minutes of the Riksbank's April meeting showed on Tuesday.
Sweden's economy is facing its worst recession since the 1930s, excluding the effects of World War Two.
The central bank slashed interest rates to a record low of 0.5 percent at its last meeting and has been mulling extraordinary measures to boost growth, such as those already taken in Britain and the United States.
Governor Stefan Ingves said buying government bonds would be the most natural extension of conventional monetary policy.
But such a move is unlikely "... until the Riksbank has done everything that can be done to facilitate the supply of credit with the aid of changes in terms for lending and deposits at the Riksbank", Ingves said in the minutes.
The central bank could also influence rates through purchases of housing bonds or commercial paper, he said.
"What the Riksbank must consider further ahead is whether economic developments require further interest rate cuts and whether the current monetary policy then needs to be supported by more unconventional methods," Ingves said.
Analysts said neither further cuts nor extraordinary measures were the most likely scenario.
"I think it's likely that rates are going to stay at 0.5 percent even if we get more bad news. Most likely is that we won't get any quantitative easing or a cut to 0.25 percent," said Peter Kaplan, economist at RBS.
At its April 20 meeting, the Riksbank decided to cut its key interest rate by 50 basis points to 0.5 percent. Analysts had, by a narrow margin, expected the interest rate to fall to 0.25 percent.
Policymaker Lars Svensson wanted rates cut immediately to 0.25 percent and held there well into 2011, which is longer than the current rate path forecast indicates.
But others worried that this might have a negative effect on the markets and that it would not do much to help the economy, the minutes show.
First Deputy Governor Svante Oberg said the Riksbank's board was united in believing that the repo rate should be cut as much as possible. However, he said that it is possible that financial markets may experience problems when the interest rate approaches zero.
"This is a question that must be studied further prior to the next monetary policy decision," he said in the minutes.
Another board member, Karolina Ekholm, said the central bank should keep the way open for a further cut of the repo rate to 0.25 per cent if this can be done without hurting the functioning of the markets.
"One should moreover consider supplementing the repo rate cut further ahead with unconventional or extraordinary measures," she said.
More hawkish was Barbro Wickman-Parak. Despite saying that 2009 would be catastrophic for the Swedish economy, she said it was possible that interest rates could begin rising next year if the economy shows signs of recovery by then.
The central bank next meets to decide on interest rates on July 1, with the decision published the following day.
(Reporting by Niklas Pollard, Daniel Dickson; editing by David Stamp)