Norway's central bank raised its benchmark interest rate by 50 basis points to 2.25% on Thursday, as most economists had expected, but said future hikes would be more "gradual", weakening the crown currency.
Norges Bank said it would probably hike again in November, but its rate path forecasts suggested a smaller increase, economists said.
The central bank's monetary policy committee raised the sight deposit rate to 2.25% from 1.75%, having signalled in August that a September hike was likely, but without indicating by how much.
"The policy rate will most likely be raised further in November," the bank said in a statement.
The rate, now at its highest since 2011, is set to increase to about 3% during the upcoming winter, the bank said, adding that projections were more "uncertain than normal".
The policy rate was zero a year ago, and the hikes are now starting to have a tightening effect on the Norwegian economy, Norges Bank said.
"This may suggest a more gradual approach to policy rate-setting ahead," it added.
The Norwegian crown fell to 10.23 against the euro at 0828 GMT from 10.20 just before the rate announcement.
"The latest rate path suggests 25 basis points hikes ahead and is on the dovish side to what markets expected beforehand," Nordea Markets said in a note to clients.
Of 30 economists polled by Reuters, 28 predicted Norges Bank would hike by 50 basis points (bps) while one forecaster had said a 25 bps increase to 2.0% was the most likely outcome, and another predicted a rise of 75 bps to 2.50%.
Norges Bank's move comes after the U.S. central bank lifted rates by a third-straight 75 bps on Wednesday and signalled more large increases to come, and follows neighbour Sweden's unexpected full percentage point hike to 1.75% on Tuesday.
The Swiss central bank hiked by 75 bps on Thursday, while the Bank of England is expected to raise rates later in the day.
Norway's August consumer prices rose 6.5% year-on-year even though the government has partly capped soaring electricity bills. Core inflation, which excludes energy, stood at 4.7%, exceeding the central bank's goal of 2.0%.
