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- The European Central Bank just pulled the trigger on its biggest interest rate hike.
- The central bank increased rates by 75 basis points, and signaled further hikes.
- Economies around the world are raising rates as they battle to keep surging inflation in check.
The European Central Bank on Thursday raised interest rates by 75 basis points as the eurozone battles to keep spiraling inflation in check.
The central bank announced that its base rate would increase from 0% to 0.75% in a press release, saying the move comes as a step "to dampen demand and guard against the risk of a persistent upward shift in inflation expectations."
The hike — the largest in ECB history — is the second in as many meetings for the central bank, which in July increased rates for the first time since 2019, moving its base rate from minus 0.5% to 0%, a first increase under its president, Christine Lagarde.
The euro was trading marginally higher after the ECB decision at $ 1.0020. On Monday, the single currency fell below $ 0.99 for the first time in two decades after Russia halted flows of natural gas to Europe.
Raising rates for a second time in three months comes against a backdrop of economic peril for Europe as it fights to combat the soaring cost of living, triggered largely by Russia's invasion of Ukraine, which has pushed up both food and energy prices in recent months.
Inflation in the Eurozone reached 9.1% in August, up from 8.9% in July, its highest level since the creation of the single currency in 1999.
Central banks across the globe are raising rates to combat inflation, with the Federal Reserve in the US having hiked three times already in 2022, and the Bank of England bumping rates six times since December to reach 1.75%.
An ECB rate hike had been widely expected by analysts, with only the scale of the increase in question. Opinions had differed on whether the central bank would raise by 50 basis points, as it did in July, or by the larger 75 basis points. Further hikes are expected in coming months.
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