The European Central Bank raised its benchmark interest rate on Thursday by a quarter percentage point to 4.25 per cent in an effort to reign in escalating inflation in the 15-nation euro zone.The move comes despite worries in some quarters that it could dampen growth. Bank president Jean-Claude Trichet was expected to explain the decision at a news conference, with attention focusing on whether more increases are coming.
Trichet has stressed that his main objective is to keep prices stable, and all but promised an increase this month at last month''s meeting. But he has also suggested that repeated interest rate hikes are probably not likely.
Inflation has been troubling central banks around the world as commodity prices including oil and food have spiked in a surge of new global demand. While higher interest rates slow inflation, they can also slow economic growth as money becomes more expensive to borrow; Trichet appears to have targeted inflation as the bigger threat.At the ECB''s June meeting, Trichet said members of the bank''s governing council stated a case for raising rates to combat inflation even then. On June 30, the EU statistics agency Eurostat said inflation in euro nations hit a record 4 percent in June, double the ECB''s inflation target of below or around 2 percent.
The Bank for International Settlements - a sort of central bank for central banks - also said on Monday that world headline inflation has risen significantly to 4.75 percent.
Trichet has stressed that his main objective is to keep prices stable, and all but promised an increase this month at last month''s meeting. But he has also suggested that repeated interest rate hikes are probably not likely.
Inflation has been troubling central banks around the world as commodity prices including oil and food have spiked in a surge of new global demand. While higher interest rates slow inflation, they can also slow economic growth as money becomes more expensive to borrow; Trichet appears to have targeted inflation as the bigger threat.At the ECB''s June meeting, Trichet said members of the bank''s governing council stated a case for raising rates to combat inflation even then. On June 30, the EU statistics agency Eurostat said inflation in euro nations hit a record 4 percent in June, double the ECB''s inflation target of below or around 2 percent.
The Bank for International Settlements - a sort of central bank for central banks - also said on Monday that world headline inflation has risen significantly to 4.75 percent.
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