The European Central Bank on Thursday announced it is taking its main rate up by 25 basis points to 3.5%, diverging from a U.S. Federal Reserve decision to pause its own hikes on Wednesday.
The central bank has raised rates since July 2022 in an attempt to bring down record-high inflation across the region. The latest inflation reading showed prices cooling down at a faster-than-expected pace, with headline inflation coming in at 6.1% in May and core inflation — which excludes volatile items — at 5.3%. This remains well above the ECB’s target of 2% headline inflation.
While markets widely expected Thursday’s decision, investors argue that a lot of uncertainty remains about what the ECB might do beyond the summer.
“The Governing Council’s future decisions will ensure that the key ECB interest rates will be brought to levels sufficiently restrictive to achieve a timely return of inflation to the 2% medium-term target and will be kept at those levels for as long as necessary,” the ECB said in a statement.
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