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By Bloomberg

Norway's central bank kept its main interest rate unchanged as slumping oil prices threaten an expansion in western Europe's biggest crude producer.

The deposit rate was kept at 1.5 percent for a 16th consecutive meeting, the Oslo-based bank said today. The decision was predicted by all 16 economists surveyed by Bloomberg.

"New information suggests that inflation and growth in the Norwegian economy are broadly in line with the September projections," Governor Oeystein Olsen said in a statement. "Against this background, the key policy rate remains unchanged. At the same time, developments abroad and the fall in oil prices have increased the uncertainty regarding the outlook for the Norwegian economy."

Oil prices plunged in the last month with Brent crude now hovering at $85 a barrel, threatening economic growth in Norway. As an investment boom in petroleum projects fades, policy makers are doing what they can to support an expansion in the $500 billion economy.

The drop in oil prices has pushed the Norwegian krone to a four-year low against the dollar, while it has lost about 3 percent against the euro this month. After initially dropping as much as 0.4 percent, the krone traded 0.1 percent weaker at 8.3722 per euro as of 10:10 a.m. in Oslo.

Extreme Easing

A slowdown in Norway's oil industry is coinciding with a return to extreme monetary easing from the world's biggest central banks. The European Central Bank said earlier this month it will buy assets for at least two years to boost inflation and economic growth in the euro area. Policy makers in Sweden have signaled they're ready to lower rates again to keep deflation from taking hold in the largest Nordic economy.

"The biggest challenge for Norges Bank is the impact falling oil prices will have on oil investments going forward, and then the ripple effects this will have on the Norwegian economy," Kjersti Haugland, an analyst at DNB ASA, said before the rate decision.

A survey last month showed oil companies anticipate investments will drop by as much as 18 percent next year, while the central bank forecasts a 10 percent decline.