The central bank for Europe raised its interest rates for the first time since the onset of the financial crisis in 2008 in order to contain mounting inflationary pressure, according to Bloomberg. On Thursday, the European Central Bank announced its decision to raise the benchmark interest rate by a quarter point to 1.25% along with a message from President Jean-Claude Trichet that inflation risks will be monitored “very closely.” Trichet added, “It is essential that recent price developments do not give rise to broad-based inflationary pressures over the medium term.”
The move was widely expected by economists after strong language from the ECB in the weeks leading up to the meeting as inflation rose above the 2% target in December before reaching 2.6% during March, adds Reuters. While Trichet asserted that monetary policy remains “accommodative,” the strong language of continued vigilance suggests that further interest rate hikes could be ahead. Trichet also said that the interest rate increase was not planned as the first in a series of moves.