(Photo: VCG)

Norges Bank, Norway's central bank, raised its key policy rate by a quarter-point to 2.75 percent on Thursday and warned it may go up again in the new year.

In a press release, the bank said higher interest rates were still needed to dampen inflation.

Even though higher interest rates will also boost monthly mortgage payments for many Norwegians, the bank hoped higher rates would help curb demand and bring inflation down in the long run.

"Activity in the Norwegian economy is still high and unemployment has remained very low," the release reads. "At the same time, the economy is slowing down and higher inflation is reducing household purchasing power." Recent price hikes have kept inflation "higher than projected," the Norges Bank statement said, and it was "expected to remain high for longer than previously projected."

The bank's overnight lending rate rose to 3.75 percent. Mortgage rates are now expected to rise accordingly.