Norway's central bank cut its key policy rate by 25 basis points to 1.25 percent due to the sharp fall in oil prices that has weakened the outlook for economic growth and employment.
At the same time, Norges Bank - which had maintained its rate since March 2012 - said the Norwegian krone currency had depreciated markedly, helping dampen some of the negative economic impact of the weaker oil prices and underpin inflation, which is expected to be close to 2.5 percent in coming years.
In addition to its rate cut, the central bank said its key policy rate should lie between 0.75 percent and 1.75 percent until March 2015, unless the economy is exposed to new major shocks.
In September the central bank said it expected its policy rate to remain at 1.5 percent until the end of 2015 but in October it omitted that guidance due to uncertainty surrounding the outlook.
Norway's headline inflation rate eased to 1.9 percent in November from 2.0 percent in October while Gross Domestic Product expanded by 0.5 percent in the third quarter from the second for annual growth of 2.1 percent, up from stagnation in the second quarter.
In its latest forecast, the central bank projected average consumer price inflation of 2.0 percent this year, rising to 2.50 percent in 2015 and 2.75 percent in 2016.
Total GDP by Western Europe's largest crude oil producer is forecast to expand by 2.0 percent this year, up from 0.7 percent in 2013, and 1.25 percent in 2015 and 1.75 percent in 2016.
The Norwegian krone has been hit hard by the decline in oil prices, falling to around 7.22 today - a level that has not been seen since December 2008 - and a drop of almost 16 percent this year.
Norges Bank issued the following statement: