THE ECB HIKES RATES

trichet euro ecb

Headline: The ECB has increased interest rates by 0.25%, to 1.25%.

Background: The ECB was expected to hike rates today, due to rising energy costs within the eurozone. Headline inflation beat expectations in March, at 2.6% year-over-year.

The impact of the rate hike remains unknown. The last time the ECB hiked rates, markets tanked shortly thereafter.

This rate hike has the potential to damage already weakened economies on the fringe of the eurozone, notably Spain and Ireland, where troubled housing sectors will be slammed by a hike in interest rates.

But for those who aren’t aware, the ECB is only concerned about price stability, not unemployment within the eurozone. So it’s policy decisions are only targeted at containing inflation, or deflation.

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