by Victoria Klesty

OSLO (Reuters) – Norway’s central bank (Norges Bank) raised its main interest rate by 25 basis points to 4.50 percent on Thursday in a bid to curb inflation and suggested it would likely remain there at this level for a while.

Of 27 economists polled by Reuters in a survey, 15 expected the rate to remain unchanged, while only 12 predicted an increase to 4.50%.

On the foreign exchange market, the Norwegian krone strengthened against the euro, gaining 1.6% to 11.535 around 09:30 GMT. It was at 11.67 just before the Norges Bank announcements.

Norway’s central bank warned last month that it would likely increase borrowing costs in December, while indicating that a fall in core inflation could weigh on monetary policy makers’ decisions.

“We see that the economy is cooling, but inflation is still too high. An increase in the policy rate now reduces the risk that inflation will remain high for a long time,” said Ida Wolden Bache, the governor of the Bank of Norway, cited in a press release.

“The policy rate will probably be maintained at 4.50% for some time,” she added.

After peaking at 7.0% in June, core inflation in Norway, which excludes energy costs, stood at 5.8% in November year-on-year. This rate is lower than the central bank’s forecasts, which expected 6.1%, but remains well above the medium-term objective of 2.0%.

Norges Bank’s next monetary policy meeting will take place on January 25.

The US Federal Reserve (Fed) left interest rates unchanged on Wednesday and indicated that the current cycle of monetary policy tightening was probably over.

The Swiss National Bank (SNB) also left its main key rate at 1.75% on Thursday. Markets are now awaiting decisions from the Bank of England and the European Central Bank (ECB) later today. A pause on rates for these two central banks is expected by economists polled by Reuters.

(Reporting Victoria Klesty, Claude Chendjou, editing by Kate Entringer)

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