UPDATE 1-Lonely Norway raises interest rates, but less likely to do so again

Norway's central bank raised its main interest rate by a quarter percentage point on Thursday but said further policy tightening had become less likely amid a global slowdown that led major economies to slash borrowing costs. Norges Bank increased its key policy rate to 1.5% from 1.25%, in line with the forecasts of 15 out of 29 economists in a Reuters poll. The remaining participants had expected an unchanged rate.

Thursday's policy tightening was Norway's fourth in 12 months amid a domestic boom driven by rapid growth in oil industry investments, a weak currency and rising government spending. As a result, Norges Bank has pressed on with rate hikes even as all other G10 central banks shifted to dovish positions or stayed on hold.

"The Executive Board's current assessment of the outlook and balance of risks suggests that the policy rate will most likely remain at this level in the coming period," central bank Governor Oeystein Olsen said in a statement. Norway's crown currency initially strengthened to 9.8124 against the euro from 9.8820 just ahead of the 0800 GMT announcement but faded to 9.8512 at 0815 GMT.

"The rate path is marginally lower from June and signals that Norges Bank is basically done hiking rates. However, they maintain a small hiking bias indicating that a hike is more likely than a cut next year," Nordea Markets economist Joachim Bernhardsen wrote in a note to clients.