* Key policy rate increased to 0.75 pct vs 0.50 pct
* First rate hike in 7 years, widely expected
* Lower future rate path
* Crown currency weakens 1 pct vs euro
* Highlights risk of global trade war in outlook (Adds comments from news conference, background)
By Camilla Knudsen
OSLO, Sept 20 (Reuters) - Norway’s central bank raised interest rates for the first time in seven years on Thursday amid faster economic growth and higher inflation, but said it would make only gradual hikes in the coming years and was wary of risks from abroad.
The bank’s executive board lifted the main policy rate by a quarter percentage point to 0.75 percent from a record low 0.5 percent, as widely anticipated in a Reuters poll of economists and in line with Norges Bank’s earlier signals.
The decision was unanimous.
With its first hike since March 2011, Norway joins a trend for tighter monetary policy in Europe. In neighbouring Sweden, the Riksbank plans to begin raising rates in December or February, while the European Central Bank aims to end bond purchases this year and is on track to increase rates next autumn.
Norges Bank Governor Oeystein Olsen told a news conference it was “almost certain” the next hike in the key policy rate would come at the end of the first quarter.
The central bank lowered its forward rate curve, however, signalling a slower pace of tightening ahead compared to the previous forecast made in June.
“In a dovish move the rate path was revised down,” Nordea Markets economist Joachim Bernhardsen wrote in a note to clients, adding that hikes were still expected in the first and fourth quarters of 2019.
Norway’s crown currency, which had strengthened by around three percent against the euro in recent weeks as investors anticipated tighter policy, fell by 1 percent to trade at 9.61 per euro following the announcement.
“This is a return back to what we have seen earlier. When the market is discussing a too aggressive tightening of the rate path they backtrack because they are afraid of a too strong Norwegian crown,” said Frank Jullum, chief economist at Danske Bank in Norway.
Norges Bank also highlighted how the risks of a global trade war and emerging market instability could weigh on the Norwegian economy.
“Higher trade barriers and persistent uncertainty may weigh on import growth among Norway’s trading partners, but may also lead to the krone remaining weaker than assumed,” the bank said.
Olsen added the “international situation” was the clearest sign of downward risk for the Norwegian economy. (Additional reporting by Terje Solsvik, Ole Petter Skonnord, Nerijus Adomaitis and Gwladys Fouche; Editing by Toby Chopra)