(Adds details, quotes, crown exchange rate)
By John Acher
OSLO, Oct 29 (Reuters) - Norway's central bank cut its main interest rate by half a point to 4.75 percent on Wednesday and signalled more cuts ahead to shield the economy from the worst effects of the global crisis.
It was the second cut this month in Norway, following the bank's half-point decrease on Oct. 15.
"The effects of the financial crisis will most likely be more pronounced than envisaged only recently," central bank Governor Svein Gjedrem said in a statement. "The slowdown in the Norwegian economy appears to be occurring rapidly and is likely to be pronounced."
The bank said that it had considered but rejected the alternative of cutting rates by 25 basis points instead of 50.
"There is now unusually high uncertainty surrounding economic developments ahead," it said, adding that it chose to put weight on a larger reduction up front to allow lending rates to households and businesses to be reduced gradually.
The bank said the deposit rate was likely to be in a range of 4-5 percent until late March. Analysts generally interpret the mid-point of the range to be where rates are headed.
In a new monetary policy report, the bank lowered its trajectory for interest rates ahead and said it saw the deposit rate bottoming out at 3.76 percent in June 2010.
Some economists had expected the bank to draw an even lower trajectory for rates ahead, some seeing a bottom below 3 percent, and market interest rates rose after the announcement.
The bank said it was closely monitoring the crown exchange rate after a substantial depreciation.
"Should the crown remain weak for a long period, inflation may remain high," Norges Bank said.
The Norwegian crown strengthened to 8.5360 against the euro
"Prices have increased markedly since autumn 2007, but the outlook suggests that inflation may edge down ahead," Norges Bank said.
The bank targets core inflation at 2.5 percent, but inflation has overshot the target since July, with the annual rise in core consumer prices at 3.1 percent in September.
Seven out of 11 economists surveyed by Reuters had expected the half-point cut, two had predicted the 25 basis points decrease and two forecast no change.
The cuts have ended more than three years of monetary tightening in Norway where the economy's prospects have dimmed as the global financial crisis has deepened.
The October cuts were the first monetary easing moves in Norway since March 2004. They followed 16 rate increases from an all-time low of 1.75 percent in mid-2005 as the bank sought to control a five-year expansion that has now sputtered. (Reporting by Oslo newsroom, editing by Mike Peacock)