ECB raises European interest rate

The European Central Bank has increased the key ECB interest rate by 25 basis points to 1.25%.

The rise comes after almost two years at historically low levels.

Jean-Claude Trichet, President of the ECB, wants to keep inflation in check and said: “Our decision will contribute to keeping inflation expectations in the euro area firmly anchored in line with our aim of maintaining inflation rates below, but close to, 2% over the medium term. Such anchoring is a prerequisite for monetary policy to contribute to economic growth in the euro area.”

Inflation in the eurozone is 2.6% compared with the medium-term target of just below 2%.