ECB raises interest rates to 2.75%

The European Central Bank raised interest rates by a quarter percentage point to 2.75% on Thursday (8 June). Commenting on the move, which had been widely anticipated, ECB president Jean-Claude Trichet said the decision "reflects the upside risks to price stability over the medium term that have been identified through both our economic and monetary analyses."

"We will continue to monitor closely all developments to ensure price stability over the medium and long term...To sum up, annual inflation rates are projected to remain elevated in 2006 and 2007," Mr Trichet added.

Despite it being the third increase in the eurozone rates since December 2005, Mr Trichet said that the rates for the euro nations are still "low...Overall, also after today's increase, the key ECB interest rates are still low by historical standards," said Mr Trichet.

Inflation increasing more than the ECB's target, economic growth near its long-term trend and positive signs in consumer spending were among the factors contributing to the ECB's move. Meanwhile, the eurozone GDP growth for this year is projected to range from 1.8% to 2.4% and from 1.3% to 2.3% in 2007. On the other hand, inflation is projected to lie between 2.1% and 2.5% in 2006 and between 1.6% and 2.8% in 2007.