The Washington Post

ECB’S rate hike keeps focus on inflation

- — Julian Mark

The European Central Bank announced Thursday that it will raise its key interest rates by half of a percentage point — a signal that it is sticking to its plans to fight inflation despite the extreme banking volatility this week. Some analysts had predicted a more modest quarter-point hike.

“Inflation is projected to remain too high for too long,” the bank said in a statement. But it added that its policymaki­ng council “is monitoring current market tensions closely and stands ready to respond as necessary to preserve price stability and financial stability in the euro area.”

ECB President Christine Lagarde said no other options were discussed among the Governing Council, adding that “it was a very large majority decision — and I would say taken in rather record time.”

Lagarde told reporters in Frankfurt that bringing down the euro zone’s inflation remained a priority, and that the central bank would be ready to act if the financial sector fell into further turmoil.

But right now, Lagarde said, the central bank’s “primary objective” is stabilizin­g prices in Europe, and its next move will be guided by economic and financial data, including the rate of inflation. “There is no trade-off between price stability and financial stability.”

Euro zone inflation is averaging 5.3 percent, according to the ECB. Lagarde said the central bank is determined to pull that rate down to 2 percent.

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