A main oil and gas supplier to the European economy, the central bank in Norway said Thursday it was keeping its policy rate stable as recovery takes hold.

Norge Bank said Thursday it would leave its key rate unchanged at 0.5 percent. In a statement of justification, the bank said inflation would be lower than it expected, which implies the Norwegian economy is becoming isolated. On the positive side, there are prospects inflation will pick up and "the upturn in the real economy appears to have taken hold, and unemployment has declined."

Norway is a main oil and gas producer and one of the central suppliers to the European economy, outside of Russia. Nearly all of the oil and gas produced in Norway is exported.

Lingering strains from last year's market downturn are catching up with Norway and production levels have been on a slow decline over the past few months. Norges Bank found lingering economic strains from energy market factors, though bank Gov. Øystein Olsen said a worst-case scenario never materialized for Norway.

"Monetary policy is expansionary and supportive of structural adjustments in the Norwegian economy," Olsen said in a statement. "The executive board's current assessment of the outlook suggests that the key policy rate will most likely remain at today's level in the period ahead."

For Norwegian oil and gas production, the central bank governor said the peak was passed more than a decade ago, though he noted the sector as a whole may have been underestimated. Nevertheless, the governor said in February the Norwegian economy needed "more legs to stand on."

Norway's decision followed a step by the U.S. Federal Reserve to raise its short-term rate by a quarter of a percentage point to between 0.75 and 1 percent. Citing steady gains in the labor sector, one of the bright spots for the U.S. economy, Federal Reserve Chair Janet Yellen said during a Wednesday news conference the U.S. economy "is doing well."

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