Norway’s central bank, also known as Norges Bank, in Oslo, Norway.
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The Norges Bank on Thursday become the first major Western central bank to raise interest rates following the onset of the coronavirus pandemic.
After cutting rates three times in 2020 due the economic fallout from the crisis, Norway’s central bank unanimously decided to raise rates to 0.25% from zero.
“A normalising economy now suggests that it is appropriate to begin a gradual normalisation of the policy rate,” said Governor Oystein Olsen in a statement Thursday.
The bank said that another hike is likely in December.
Norway’s currency rallied to its highest levels since June against the euro, and gained 0.7% against the U.S. dollar.
The rate hike comes as many central banks consider similar moves amid solid growth and surging inflation. In the United States, Federal Reserve officials reiterated Wednesday that a tapering of bond buying is coming “soon.” The European Central Bank recently slowed its bond buying, but an actual rate move is expected to be still some way off for both banks.
“The reopening of society has led to a marked upswing in the Norwegian economy, and activity is now higher than its pre-pandemic level. Unemployment has fallen further, and capacity utilisation appears to be close to a normal level,” the bank added in the statement.
