The central bank of Norway, also known as Norges Bank, in Oslo, Norway.
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Norges Bank on Thursday became the first major Western central bank to raise interest rates after the start of the coronavirus pandemic.
After cutting rates three times in 2020 due to the economic fallout from the crisis, Norway’s central bank has unanimously decided to raise rates to 0.25% from zero.
“A normalizing economy now suggests that it is appropriate to begin a gradual normalization of the policy rate,” Gov. Oystein Olsen said in a statement Thursday.
The bank said another hike is likely in December.
The Norwegian currency hit its highest levels since June against the euro and gained 0.7% against the US dollar.
The rate hike comes as many central banks consider similar measures amid strong growth and runaway inflation. In the United States, Federal Reserve officials reiterated on Wednesday that a cut in bond purchases was coming “soon”. The European Central Bank recently slowed its bond purchases, but a real rate move should still be a long way off for both banks.
“The reopening of society has led to a strong recovery in the Norwegian economy, and activity is now above its pre-pandemic level. Unemployment has fallen further and capacity utilization appears to be close to a normal level,” the bank added in the statement.