ECB steps up its fight against inflation

CHRISTINE Lagarde turned the screws on eurozone borrowers yesterday with an unprecedented 0.75 percentage point interest rate rise.

The move came even as the European Central Bank (ECB) chief warned of an economic slowdown amid mounting fears of recession.

The US Federal Reserve has also raised rates by three-quarters of a percentage point twice in recent months to try to cool soaring inflation in the States.

That may put pressure on the Bank of England to follow suit.

However, markets have scaled back the likelihood that the Bank will do so when its rate-setters meet next week, with many expecting a rate hike of 0.5 percentage points rather than 0.75.

The ECB, meanwhile, has never raised interest rates by as much since the launch of the euro in 1999. It takes the eurozone’s benchmark interest rate from zero to 0.75pc, the highest since 2011.

Rates in the eurozone have been at or below zero for a decade as officials tried to stimulate the stagnant economy following the single currency debt crisis.

Now Lagarde is more worried about slaying the dragon of spiralling prices, with eurozone inflation hitting 9.1pc in August.

She warned that interest rates will rise again ‘because inflation remains far too high’. It is the latest sign that central bank hawks are in the ascendant. Carsten Brzeski, an economist at investment bank ING, said: ‘It looks as if the doves have left the ECB nest.’