Record rise in eurozone interest rates

The European Central Bank has announced a record rise in interest rates across the eurozone in a bid to combat soaring inflation.

Prices are climbing across the continent, and in some of the 19 countries that use the euro inflation has reached double figures.

Despite concerns that higher rates would further squeeze consumers’ disposable incomes and increase the depth of the looming recession, the central bank’s governing council raised all its key rates by three-quarters of a percentage point.

It comes after the bank raised interest rates by half a percentage point in July, its first increase in 11 years.

Rates are likely to be increased again later this year.

“While eurozone inflation has largely been driven by supply side challenges rather than excessive demand, the ECB has acted firmly as it looks to avoid expectations of higher inflation from becoming entrenched,” said Rob Clarry, investment strategist at Evelyn Partners, quoted by Sky News.

“Another crucial reason is to try and halt the euro’s slide against the US dollar given that this has put further upward pressure on inflation.

“Fundamentally, it appears that the ECB is taking a similar stance to the Bank of England and the Federal Reserve: tackling inflation at the expense of economic growth.”