Norway raises rates, first in Europe in crisis

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OSLO, October 28, 2009 (AFP) – Norway on Wednesday became the first European country to raise interest rates this year in the global financial crisis, which it managed to overcome thanks to its huge oil revenues. The Norwegian central bank raised its key demand deposit rate by a quarter of a point to 1.50 percent, the first step in what is expected to be a gradual tightening in monetary policy.

“Activity in the Norwegian economy has picked up more rapidly than expected,” central bank governor Svein Gjedrem said.

Norway thus became the first European country to raise interest rates after economies around the world were hit by a sudden and severe downturn in the last quarter of last year.

Australia in early October and Israel in late August raised rates as well after their economies fared better than most during the meltdown.

The beginning of the global crisis is widely considered to have been marked by strains in the fund management sector and special intervention by the European Central Bank in early August 2007.

The crisis then took a radical turn for the worse in September 2008 with the collapse of US investment bank Lehman Brothers.

But Norway, buoyed by oil earnings and governme