Norway's Central Bank Norges Bank's Executive Board decided on Wednesday to raise its key policy rate (sight deposit rate) by 0.25 percentage point to 4.50 percent effective from June 28, 2007, said reports reaching here on Wednesday from Oslo.

The rate was last raised in May, and this is the 11th increase since November 2005, Norwegian Broadcasting reported, quoting a statement from the Executive Board.

The Board says consumer price inflation remains moderate in spite of a prolonged cyclical upturn in the Norwegian economy. Underlying inflation has been relatively stable and ranged between 1 percent and 1.5 percent for some time.

There are nevertheless several factors indicating that inflation will pick up. Wage growth is rising and there are prospects that the economic expansion will last somewhat longer than previously envisaged, according to the Board.

Employment is rising approximately as projected and unemployment is lower than during the previous expansion. There is a shortage of labor and certain important input factors in many industries, the statement says.

Temporarily low CPI inflation this year will be followed by temporarily high CPI inflation next year. Excluding energy prices, inflation is projected to rise at a more gradual pace, but the projections are uncertain, the Board says.

The Central Bank says that according to the strategy in Monetary Policy Report 2/07, the key policy rate should be in the interval of 4.5-5.5 percent in the period to the publication of the next Report on October 31, conditional on economic developments that are broadly in line with projections.