Poor economy, low oil prices cause Norway to cut interest rate by 0.25 points to 1.25 percent

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In a surprise move, Norway's central bank has cut borrowing costs as it frets over the impact of the sharp fall in oil prices on the country's economy.

In the first adjustment since March 2012, the bank cut its main interest rate by a quarter of a percentage point cut to 1.25 percent.

Justifying the move, it said "activity in the petroleum industry is softening." The sharp fall in oil prices over the past few months has raised concerns over the oil-rich country's economy.

Norges Bank said Thursday it expects unemployment to rise because of the poor economic climate and forecasts inflation to remain at about 2.5 percent in the coming years.

The new interest rate comes into force Friday.