ECB ups rates to 2.75 per cent

24-08-2006

The European Central Bank (ECB) has raised eurozone interest rates by 0.25 percentage points to 2.75 per cent, a move that had previously been widely anticipated.

The decision to increase interest rates has been made to combat high inflation across Europe, with the current value of 2.5 per cent above the target of two per cent.

Jean-Claude Trichet, president of the bank, claimed that despite the rise, rates are still low and the overall stability of the eurozone market was the most important consideration for the ECB.

"This decision reflects the upside risks to price stability over the medium term that have been identified through both our economic and monetary analyses," he said from the Bank of Spain, Madrid.

The rising global price of oil and continued economic recovery have contributed to higher inflation rates, and Mr Trichet suggested that further interest rate rises in the coming months could be possible.

He said: "Given the outlook for price developments and the dynamism of money and credit growth in the euro area, we will continue to monitor closely all developments to ensure price stability over the medium and longer term.

"Monetary developments, therefore, require careful monitoring, in particular in the light of strong dynamics in housing markets."

But the president maintained the economic growth among the eurozone countries remained a distinct possibility "despite the impact of the rise of oil prices".

"The conditions are in place for growth in the euro area, remaining close to its potential rate," he concluded.

Interest rates have been kept on hold for the last two months by the ECB, with rates remaining unchanged for two years prior to December last year.


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