Jean Claude Trichet, the president of the European Central Bank, has defended yesterday's 25 basis point hike in interest rates as good for the eurozone, as EU leaders prepare for talks on the bailout of Portugal.
Acting against inflation was “in the interests of all members and partners of the single European market and single currency”, and would help boost economic confidence, Trichet said yesterday, the FT reports.
His comments followed the ECB’s decision to lift its main interest rate from 1% to 1.25%, threatening the most vulnerable eurozone economies such as Ireland and Portugal.
The US Federal Reserve and Bank of England have yet to start tightening policy despite inflation worries.
Portugal’s outgoing government was last night preparing a formal request for a possible €70bn-€80bn ($100bn-$114bn) rescue package, after this week’s dramatic escalation in the country’s fiscal crisis, according to the FT.
George Osborne, who will today attend eurozone crisis talks in Hungary, is preparing to make more than £4bn of British-backed loans available to Portugal as he faces criticism from eurosceptic Tory MPs.
The euro neared a six-month trough versus the dollar today, climbed against the yen and touched a 15-month peak against the dollar, supported by market expectations the ECB will raise interest rates further in coming months, Reuters reports.
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