The facade of Norway's central bank, also known as Norges Bank, in Oslo, Norway.
The central bank predicted the policy rate would rise to 4.25% during the autumn.
"If we do not raise the policy rate, prices and wages could continue to rise rapidly and inflation become entrenched," Norges Bank Governor Ida Wolden Bache said in a statement.
"Today's hawkish decision shows that Norges Bank means business and is concerned about inflation becoming entrenched," analysts at Nordea said in a note to clients.
The hike raises the policy rate to its highest level since the outbreak of the global financial crisis of 2008.
Persons:
Norges Bank Governor Ida Wolden Bache, Nordea
Organizations:
Norges Bank, Reuters, Norges Bank Governor, Bank, European Central Bank, U.S . Federal Reserve
Locations:
Oslo, Norway, Norway's, U.S