Euro interest rates hiked

03-07-2008

Euro interest rates hiked
The European Central Bank (ECB) today increased eurozone interest rates by a quarter of a per cent as inflation hits record levels.

Interest rates were risen to 4.25 per cent.

Inflation in Europe stood at four per cent in June – up from 3.7 per cent in May – as rising oil and food prices push up the cost of living.

Jean-Claude Trichet, president of the ECB, explained the interest rate increase was necessary to hit inflation targets and return price stability.

"This decision was taken to prevent second round effect of inflation," he said.

"Inflation rates continue to rise significantly since autumn – and are expected to stay above levels of price stability for periods longer than thought."

He added the increase was necessary to price expectations "firmly anchored".

However, Mr Trichet stated: "Economic fundamentals remain sound and do not suffer from major imbalances."


The higher interest rates have now hit currencies with sterling falling 0.22 per cent to £1 to €1.25 – still marginally above the record lows seen in April.

The dollar fell to €0.63 – again the lowest since April.

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