Norway cuts rates by half a point

Norway's central bank has cut the country's interest rate by 0.5%, to 4.75%, in an attempt to stave off a severe economic downturn.

The country, which relies heavily on revenue from its oil reserves, has been hit by recent falls in the oil price.

"The slowdown in the Norwegian economy appears to be occurring rapidly and is likely to be pronounced," said the bank's chief Svein Gjedrem.

The cut is Norway's second half-point reduction in interest rates this month.

In a new monetary policy report, the bank also revised down its forecast for economic growth this year, from 3.25% to 2.5%.

Some analysts had in fact expected a bigger rate cut, but fears over rising inflation prevented the bank from making a bolder move. Erik Bruce, senior economist at Nordea Markets, said: "The central bank's focus is still on fighting inflation."

Inflation in Norway currently stands at 3.1%, above the central bank's target of 2.5%.

Norway's rate cut comes on the same day that China announced a 0.27% cut in interest rates. The US is expected to cut rates by 0.5% later.