scorecardresearch

European Central Bank raises key rate

The European Central Bank is raising its main interest rate by a quarter of a percentage point to fight inflation despite the debt problems afflicting Portugal, Greece and Ireland.

The European Central Bank is raising its main interest rate by a quarter of a percentage point to fight inflation despite the debt problems afflicting Portugal, Greece and Ireland.

The key refinancing rate is going up to 1.25 percent from a record low of 1 per cent. Bank President Jean-Claude Trichet has warned about rising inflation as some parts of Europe's economy recover.

The bank must also keep in mind the impact of higher rates on countries with troubled government finances. Portugal is asking for a bailout so it can pay its debts, and Greece and Ireland have already been bailed out.

Markets are waiting for Trichet's news conference for clues about how far the bank might raise rates in coming months.
The Bank of England, meanwhile, has kept rates unchanged.