Norway's central bank announced a 50-basis-point hike to its benchmark interest rate on Thursday, the country's largest single increase since 2002.
The move takes the policy rate from 0.75% to 1.25%, and Norges Bank Governor Ida Wolden Bache said in a statement that it will likely be raised to 1.5% in August.
The bank's Monetary Policy and Financial Stability Committee voted unanimously in favor of the rate rise, which was double the level broadly expected by economists.
The committee said in a statement that a "markedly higher" policy rate is needed to stabilize inflation around the Norges Bank's target of close to 2%. Norwegian consumer price inflation came in at a 13-year high of 5.4% year-on-year in April, significantly above expectations.
However, the central bank said a tight labor market means employment will likely remain high even with higher interest rates.
"Prospects for a more prolonged period of high inflation suggest a faster rise in the policy rate than projected earlier," Wolden Bache said.
"A faster rate rise now will reduce the risk of inflation remaining high and the need for a sharper tightening of monetary policy further out."
The committee said it was concerned about inflation moving faster than anticipated against the backdrop of "little spare capacity in the Norwegian economy," along with sustained global inflationary pressures and the weakened Norwegian krone currency.