* Norges Bank keeps key rate at 2.25 pct as forecast
* Says expects to keep rates on hold until Q3 2012
* Says economic outlook cloudy, cuts 2011 growth forecast (Adds bank governor and analyst comments, forecasts, background)
By Walter Gibbs and Camilla Knudsen
OSLO, Oct 19 (Reuters) - Norway’s central bank kept its main interest rate at 2.25 percent as expected on Wednesday and ratcheted down its rate-hike projections as the oil-rich country braces for effects from the euro-zone debt crisis and sluggish global growth.
The central bank said it was only likely to increase its key policy rate again in a year’s time as economic turbulence and weaker prospects abroad darken the outlook for Norway’s hitherto accelerating economy.
“Based on Norges Bank’s current assessment, the key policy rate will be kept at the current level for some time ahead”, Governor Oeystein Olsen said, citing “an unusually high level of uncertainty surrounding developments ahead”.
He added: “If the turbulence abroad intensifies and the outlook for growth and inflation weakens further, the key policy rate may be reduced. If there are prospects for higher growth and inflation, the key rate may rise earlier.”
The crown slipped after the rate decision to 7.739 against the euro from 7.724 just before the news, then bounced back to 7.734 at 1311 GMT.
Norges Bank said it would likely keep rates between 1.75 percent and 2.75 percent through March 2012, when its next Monetary Policy Report is due. The range’s midpoint — seen as the target for the period — implies no change in rates.
The bank’s chief economist, Jon Nicolaisen, pointed to the third quarter of 2012 as a likely time for the next rate hike. Several economists said the bank seemed focused on downside risks to the economy.
“Their risk assessment has a low rate scenario which is much lower than their main scenario,” said Bjoern Roger Wilhelmsen, macroeconomist at First Securities.
As recently as June the bank had said it expected to hike its rate two or three times by the end of 2011 and to reach 3.5 percent by next summer to check housing price inflation and rising wages as the job market tightened.
That battery of planned hikes was shelved in August, as the global economy roiled. On Wednesday the bank also reined in sharply its long-term deposit-rate projections.
It plotted an average policy rate through 2012 of 2.25 percent — today’s level — whereas in June it had seen 3.5 percent next year. For 2013 it forecast a 3 percent rate, down from 4.5 percent, and 3.75 percent for 2014, down from 4.75 percent.
It was the fourth straight meeting at which Norges Bank held its fire.
Elisabeth Holvik, chief economist at Sparebank 1, said she expected no movement on official rates until mid-2013.
“They point to a reduced outlook for growth and inflation, and they point to higher lending costs for banks and resulting tighter credit,” she said of Norges Bank’s economists.
“That will transfer to higher rates on loans for households and companies without the central bank doing anything.”
Norway’s core gross domestic product, excluding energy, rose 1 percent in the second quarter, twice the rate of the first quarter, though economists have worried the trade-driven economy would slow as demand abroad slackened.
Norges Bank on Wednesday reduced its estimate for mainland growth throughout 2011 to 2.75 percent from a previous 3 percent.
Last week 12 of 13 analysts surveyed by Reuters said they expected Norges Bank to keep its main rate at 2.25 percent and leave it there at least through the end of 2011, while one predicted a quarter-point cut on Wednesday.
Additional reporting by Gwladys Fouche, Victoria Klesty, Terje Solsvik, Henrik Stoelen, Joachim Dagenborg and Ole Petter Skonnord; Editing by Hugh Lawson, Ron Askew