European Central Bank steps up inflation battle with bold 0.75% rate hike
Christine Lagarde yesterday terrified borrowers in the eurozone with an unprecedented interest rate hike of 0.75 percentage point.
The move came even as the chief of the European Central Bank (ECB) warned of an economic slowdown amid mounting fears of a recession.
The US Federal Reserve has also raised interest rates by three-quarters of a percentage point twice in recent months to try to cool rising inflation in the United States.
Rate hikes: European Central Bank head Christine Lagarde warned of an economic slowdown amid mounting recession fears
That could put pressure on the Bank of England to follow suit.
However, markets have reduced the likelihood that the Bank will do so when its rate-setters meet next week, with many expecting a rate hike of 0.5 percentage point instead of 0.75.
Meanwhile, the ECB has raised interest rates at the highest rate since the introduction of the euro in 1999.
It brings the eurozone benchmark interest rate from zero to 0.75 percent, the highest since 2011.
Eurozone interest rates have been at or below zero for a decade as officials tried to stimulate the stagnant economy following the single currency debt crisis.
Now Lagarde is more concerned about beating the dragon of rising prices, with inflation in the eurozone reaching 9.1 percent in August.
She warned that interest rates will rise again ‘because inflation remains much too high’.
It’s the latest sign that the central bank’s hawks are on the rise.
‘Carsten Brzeski, economist at investment bank ING, said: ‘It seems that the pigeons have left the nest of the ECB.’