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UPDATE 2-Norway sticks to Sept rate hike plan as pandemic lingers

* Norges Bank holds base rate at 0%

* Continues to signal September hike

* Says uncertainty remains over pandemic (Adds quote, detail, background)

OSLO, Aug 19 (Reuters) - Norway’s central bank plans to raise its key policy interest rate next month as the economy shakes off the effects of the COVID-19 pandemic, it said on Thursday, sticking to its schedule despite a recent rise in coronavirus infections.

Norges Bank’s monetary policy committee kept the rate on hold at a record low 0.0% for now, as unanimously expected in a Reuters poll of economists.

“In the committee’s current assessment of the outlook and balance of risks, the policy rate will most likely be raised in September,” Governor Oeystein Olsen said in a statement.

The plan puts Norway first in line among the G10 group of developed economies to begin scaling back pandemic-driven emergency stimulus, ahead of New Zealand which on Wednesday delayed an expected hike due to a new COVID-19 outbreak.

Infections have risen in recent weeks as Norway lifted most of its lockdown measures, and the government has said it expects to remove the few remaining restrictions next month.

“A high vaccination rate reduces the need for COVID-related restrictions. Nevertheless, it cannot be ruled out that new virus variants may lead to a retightening of restrictions,” Norges Bank wrote.

Norway’s currency, the crown, weakened to 10.50 against the euro at 0818 GMT from 10.46 just before Norges Bank’s policy announcement.

The central bank will announce its next policy rate decision and updated economic forecasts on Sept. 23.

In June, it raised its prediction for economic growth for 2022 to 4.1% from earlier 3.4%.

Norges Bank said back then it expected to raise rates four times over the course of 12 months, reaching 1.0% by mid-2022.

“Economic developments have been broadly as projected in the June report,” the policy committee said.

While core inflation has eased to just 1.1%, well below the central bank’s 2.0% goal, it is expected to pick up again due to the increased economic activity, Norges Bank said. (Reporting by Terje Solsvik, editing by Victoria Klesty and Tomasz Janowski)

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