Eurozone raises interest rates for first time in 11 yearson July 21, 2022 at 12:24 pm

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The European Central Bank has raised rates as it tries to tackle soaring eurozone inflation.

ECB president Christine LagardeImage source, Reuters

The European Central Bank (ECB) has raised interest rates for the first time in more than 11 years as it tries to control soaring eurozone inflation.

The ECB raised its key interest rate by 0.5 percentage points to 0.0% on Thursday, and plans further increases later in the year.

The rate has been negative since 2014 to encourage banks to lend rather than deposit money with the bank.

Consumer prices rose at a record rate of 8.6% in the 12 months to June.

That is well above the bank’s 2% target.

Central banks around the world, including the Bank of England and America’s Federal Reserve, have been raising rates as price rises accelerate.

Soaring energy, fuel and food costs are pushing up inflation, putting pressure on struggling families.

The ECB began cutting interest rates after the 2008 financial crisis to stimulate growth, and took them as low as -0.5% during the pandemic.

However, earlier this year it signalled it planned to increase them again, although economists had only expected an increase of 0.25 percentage points in July.

There are concerns that soaring inflation could become entrenched, and any gas shortage over the winter could push energy prices up, further impacting the cost of living.

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