Norway has become the first European country to raise its interest rates since the global financial crisis began in earnest, citing better than expected economic growth as the reason for the decision.
Announcing an increase in the key borrowing rate of 0.25 percent, lifting the rate to 1.5 percent, Svein Gjedrem, governor of the central bank in Norway, a country which enjoys considerable revenue from oil, said that "Activity in the Norwegian economy has picked up more rapidly than expected."
As the Wall Street Journal reports, in addition to the increased revenue Norway has received as a result of the increase in the price of oil in recent months, a stimulus package that was in excess of 4 percent of its expected gross domestic product in 2009 is credited with ensuring that the Scandinavian nation has suffered less than most other countries in the Organization for Economic Cooperation and Development (OECD).
In addition to the interest rate increase announced on Wednesday the Norwegian central bank, or Norges Bank, confirmed that rates will remain between 1.25 percent and 2.25 percent until March 24 2010. Increases in the rates will then be gradual, with a figure of 2.75 percent anticipated by the end of 2010.
The second quarter of 2009 was, according to AFP, when growth returned to Norway, after a relatively low level recession. Even when taking oil revenues and maritime transport out of the equation Norway, where house prices are now where they were prior to the global financial meltdown, is expecting to see growth in 2010 of 2.1 per cent.
In a nation whose population is close to five million and which is not a member of the European Union, unlike neighbors Finland and Sweden, only 2.7 percent of the working population are currently unemployed, the lowest rate of unemployment in Europe.
And only last month Mr Gjedrem the Central Bank's governor for the last decade, said that Norway had already started to unwind some of the measures taken to stimulate the economy as the recession took its toll.
Fellow OECD member Australia raised its interest rates in October but the Wall Street Journal states that there are seemingly no other countries in Europe yet ready to follow Norway's lead in raising interest rates.
It appears that the only reason interest rates in Norway may not increase as predicted by the central bank is if the country's currency the krone gains too much strength in the coming months, thereby damaging the Norwegian export sector.