The European Central Bank today signalled the extent of its inflation fears by raising the main policy rate by 25 basis points to 4.25%.
The rate had been held at 4% since June 2007 but the move up was widely expected after comments made by ECB president Jean-Claude Trichet at the June policy meeting. Marco Pirondini, global chief investment officer at Pioneer Investments, said late last month that a rate rise would be bad for the eurozone, causing the currency to rise, equities to fall and a probable spike in oil prices as the strong euro put further pressure on the dollar. However, he added, “in Europe, the ECB has a mandate to target inflation. You can’t complain if they don’t care about growth; it’s out of their mandate...
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