The European Central Bank has raised its benchmark interest rate for the first time in 11 years.
The central bank, which represents the 19 countries that use the Euro currency, lifted its
trendsetting overnight interest rate by 50 basis points to help cool down overheated inflation.
The 50-basis point interest rate increase was higher than expected. Economists had been
forecasting a 25-basis point hike.
The increase brings the European Central Bank’s key interest rate to 0% and ends Europe’s
long running experiment with sub-zero borrowing costs.
Inflation in the Eurozone in June hit a record 8.6%, with many economists forecasting that it will
reach 10% later this year.
Europe’s central bank is struggling with the threat of a recession and the war in Ukraine that is
pushing up food and energy costs, while a rising U.S. dollar leaves the Euro currency
depressed.
The Euro rose to a session high following the interest rate hike, trading at $1.0257 U.S.
