ECB Raises Interest Rate

The European Central Bank has raised its key lending rate by 25 basis points to 4.25%.
Jean-Claude Trichet, president of the ECB will hold an afternoon press conference where he may indicate whether the increase will be a one-time event or the start of a cycle of tighter monetary policy.

It is likely that inflation hawk, Axel A. Weber, the president of Germany’s Bundesbank, was at the forefront in calling for the rate hike and convinced Trichet and other ECB officials to go along with him.

Official European inflation is at 4%, twice the ceiling set by the ECB.