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Euro zone interest rates raised by a quarter percentage point

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Euro zone interest rates raised by a quarter percentage point

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The European Central Bank has raised euro zone interest rates from 2.5% to 2.75% . Economists said that was inevitable given accelerating inflation – above the ECB’s target – economic growth and signs of a pick-up in consumer spending.

Bank President Jean-Claude Trichet said: “Economic growth is broadening and becoming more sustained. Looking further ahead the conditions are in place for more growth in the euro area to remain close to its trend potential rate, despite the impact of the rise in oil prices.”

Trichet said interest rates are still “low” by historical standards. After a long pause, this is the the third time the cost of borrowing in the euro zone has been put up in six months. Trichet said the ECB policymakers had considered an increase of 0.5% but in going for a 0.25% had taken account of recent market volatility.

On future rate hikes he said the bank has no predetermined plan .. but will “do what’s necessary when it is necessary.”