* Keeps rates on hold at 1.5 pct
* Still sees next hike in summer of 2015
* Sees 2014 mainland GDP growth at 1.75 pct, 2015 at 2.5 pct
OSLO, March 27 Norway's central bank kept
interest rates on hold on Thursday, as expected, and said it
remained on course for a rate increase in the summer of 2015,
when the economy should be recovering from a recent rough patch.
The bank left its key rate at 1.5 percent and said growth on
the mainland - excluding the vast offshore oil and gas sector -
would slip to 1.75 percent this year from last year's 2.0
percent, before picking up to 2.5 percent in 2015.
"The analyses imply an unchanged key policy rate in the
period to summer 2015, followed by a gradual increase," Governor
Oeystein Olsen said. "The path for the key policy rate remains
approximately unchanged from December."
Norway's crown currency rose after the bank kept its rate
path in place, wrongfooting some investors who had expected it
to flag a loosening of monetary conditions.
Norway was western Europe's best-performing economy until
recently. It suffered unexpected turbulence late last year as
consumption weakened, housing prices fell and growth in oil
investment slowed. That created a policy dilemma for the bank.
A rate cut would have given the economy a much-needed boost.
But household debt is already among the highest in Europe and
the currency is at a four-year low, threatening higher
inflation. The bank's room to manoeuvre was limited.
And growth is expected to outpace the euro zone's for years
to come, the budget is increasing thanks to lucrative oil
revenues and unemployment is barely visible at around 3 percent.
All support the case for a rate hike.
The bank noted that imbalances in the financial sector
remain high but given the recent house price falls, they are not
building up any further.
"Low house price inflation may eventually slow the growth of
household debt," the bank said. "But the ratio of total credit
to GDP is at a historically high level, and household debt has
risen faster than disposable income."
The bank expects its key policy rate to average 1.5 percent
this year and 1.75 percent in 2015. It sees the jobless rate
rising to 3.75 percent this year and 4 percent in 2015.
(Reporting by Balazs Koranyi; Editing by Larry King and Toby