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The European Central Bank raised interest rates for the first time in 11 years on Thursday, a major move as policymakers fear they will lose control of rising consumer prices.
With inflation already approaching double digits, the EU economy is suffering from the impact of Russia’s war in Ukraine.
But ECB chief Christine Lagarde says the policy shift will underpin the change in inflation trends and help the ECB reach its target in the longer term.
The bank approved a 0.5 percent hike as the inflation outlook is deteriorating rapidly.
The decision was also influenced by the recent fall of the euro to a two-decade low against the dollar.
The bank’s governing council said it “judged that it was appropriate to take a larger first step towards normalizing its policy rate than signaled at its previous meeting”.
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