ECB raises interest rates across eurozone by record margin

theguardian.com:

The European Central Bank has raised interest rates across the eurozone by a record margin to combat soaring inflation that has reached double figures in some of the currency bloc’s 19 member countries.

Setting aside concerns that higher rates would add to the current squeeze on consumers’ disposable incomes and increase the depth of a looming recession, the central bank’s 25-member governing council raised its key benchmarks by an unprecedented 0.75 of a percentage point to 1.25%.

The move follows a similar increase by the US Federal Reserve and is expected to put pressure on the Bank of England to follow suit when its policymakers meet next week to review the UK’s monetary policy.

The ECB announced its first increase in rates in 11 years at its previous meeting in July, raising rates by a half-point.

Its benchmark is now 1.25% for lending to banks. The Fed’s main benchmark is 2.25% to 2.5% after several large rate rises, including two of three-quarters of a point. The Bank’s key benchmark is 1.75%.

Rising eurozone inflation, which reached a record rate of 9.1% last month amid rocketing natural gas prices, has forced the ECB to tear up its usual rule book of incremental increases.

Altaf Kassam, the head of European investment strategy at State Street Global Advisors, said the increase was “inevitable” after a surprise jump in the headline rate of inflation in August.

The growth in prices fell in France to 5.8% from 6.1% in July, but increased in most other eurozone countries.

“The ECB had to respond forcefully to criticism of falling behind the curve, especially with the worry that second-round effects were starting to taking hold. This hike was also about putting a floor under the euro, and keeping a lid on the extra imported