Oslo - Norway's central bank Wednesday raised its key lending rate to 5.50 per cent, citing that inflation was picking up.

The rate increase of 0.25 percentage points was due to take affect Thursday.

The bank's latest increase was in December when it announced a hike of 0.25 percentage points to 5.25 per cent.

The governors have earlier said they would operate with a lending
rate of between 5 and 6 per cent through June "unless the Norwegian
economy is exposed to major shocks."

In a statement, Norges Bank deputy governor Jan F Qvigstad said
"inflation is moving up. Various measures of inflation are slightly
divergent, but on the whole underlying inflation is close to 2.5 per
cent."

The labour market was still tight and house prices were on the rise
after several months of decline. Oil prices were also high while the US
economy was weak, the statement said.

"Higher interest rates will contribute to a gradual decline in
capacity utilisation, so that inflation does not become too high,"
Qvigstad said. (dpa)