The European Central Bank raised its key interest rate to 1.5 per cent to dampen inflation and hinted at more increases in coming months, even though they would add pressure on debt-ridden economies like Greece.
Thursday's hike, the second this year, was widely expected but the indication by ECB president Jean-Claude Trichet that there would be further increases this year cemented views that the bank will not be derailed by the debt crisis in its mission to get inflation down.
The ECB's responsibility is to keep inflation, which is running at 2.7 per cent, below its target of just below 2 per cent.
Trichet said in a press briefing the bank would 'monitor very closely' price developments — he traditionally uses that phrase to indicate that the tightening cycle will continue but that rates would not rise next month.
Though higher rates may be necessary for a potentially overheating economy like Germany's, they will add to the growth concerns of the eurozone's more indebted nations, such as Greece and Portugal.
Source : New Age
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