ECB raises rates, with 'more ground to cover'
The European Central Bank raised interest rates by 25 basis points to 3.25 percent as expected on Thursday and signalled that more tightening would be needed to tame inflation. The central bank for the 20 countries that share the euro has lifted rates by a combined 375 basis points since last July, its fastest pace of tightening. But it made clear that further action was likely given mounting wage and price pressures. That came a day after the US Federal Reserve also raised its benchmark rate by a quarter of a percentage point – in its case to a 5.00-5.25 percent range – but hinted that could be the last in a historic series of hikes. "We are not pausing – that is very clear," ECB President Christine Lagarde told a press conference. "We know that we have more ground to cover." Lagarde said there were still big upside risks to inflation, notably from recent wage deals and high corporate profit margins, and that financial conditions were still not sufficiently tight. She noted that the bank's written statement made reference to future "policy decisions" in the plural, possibly suggesting more than one further hike. The ECB move, a slowdown after three consecutive 50 basis point increases, comes only days after euro zone banking data showed the biggest drop in loan demand in over a decade. That suggests previous rate rises are working their way through the economy and that ECB policies are now restricting growth. "Rate decisions will continue to be based on its assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation, and the strength of monetary policy transmission," the ECB said in a statement issued before the press conference. (Reuters)