OSLO (Reuters) – Norway’s central bank raised its benchmark interest rate on Thursday as expected, and said more hikes will follow as it joins a short but growing list of nations moving away from emergency-level borrowing costs.

Norges Bank’s monetary policy committee raised the sight deposit rate to 0.25% from a record low of zero, as forecast unanimously (https://www.reuters.com/article/norway-economy-rates-idUSL8N2QG31X) in a Reuters poll of analysts and in line with the central bank’s own plan (https://www.reuters.com/article/norway-economy-rates-idUSL8N2PQ1WQ).

In a statement, Governor Oeystein Olsen of Norges Bank stated that the policy rate would most likely rise further in December based on their current assessment of the outlook.

According to the monetary policy committee, its prediction of four additional hikes before 2022 (to a rate of 1.25%) was now more probable.

At 0808 GMT (from 10.1031 prior to the announcement), Norway’s crown currency strengthened to 10.0786 against euro.

In 2020, the central banks cut interest rates by three times to counter the COVID-19 epidemic. The result was a boom of housing prices due to the easy access to cheap credit.

The government in recent months removed most lockdown restrictions however and unemployment has fallen more than expected, while the central bank’s own business survey showed a rise in activity https://www.reuters.com/world/europe/norway-business-activity-rises-bottlenecks-emerge-2021-09-14 and pointed to growing capacity constraints.

Nordea Markets stated that Norges Bank’s announcement was “yet more hawkish tilt” on monetary policies in a note to its clients.

Many of the world’s central banks are now laying the groundwork for a transition to life with less stimulus, and some developed economies have already raised rates, such as the Czech Republic (https://www.reuters.com/article/czech-economy-rates-idUSL8N2PC69R), South Korea (https://www.reuters.com/business/finance/skorea-seen-delivering-its-first-pandemic-era-rate-hike-2021-08-25) and Iceland.

In the United States, the Federal Reserve on Wednesday said it will likely begin reducing its monthly bond purchases as soon as November (https://www.reuters.com/business/finance/fed-likely-open-bond-buying-taper-door-hedge-outlook-2021-09-22) and signalled interest rate increases may follow more quickly than expected.

The bank stated that the Norwegian economy contracted 2.5% in 2020 and is expected to expand by 4.5% next year. This will be more than it had predicted 3 months ago.