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ECB breaks ranks with rate hike

April 7, 2011 at 9:48 AM

FRANKFURT, Germany, April 7 (UPI) -- The European Central Bank broke ranks with other major central banks Thursday raising key lending rates to slow inflation.

The ECB raised its bank-to-bank overnight rates 25 basis points from a historically low 1 percent, the rate set during the recession, to 1.25 percent.

At a press conference in Frankfurt, Germany, Bank President Jean-Claude Trichet said, "Our decision will contribute to keeping inflation expectations in the euro area ... below, but close to, 2 percent over the medium term."

He said recent data showing 0.3 percent quarter-on-quarter economic growth in the eurozone -- the 17 nations that use the euro as currency -- "points toward a continued positive underlying momentum." Economic improvements, however, are set "in an environment of elevated uncertainty," he said.

He called the rate of economic growth "still moderate," but said there was "ample" liquidity in financial markets. Interest rates across the eurozone also "remain low," he said, "Thus the stance of monetary policy remains accommodating and thereby continues to lend considerable support to economic activity and job creation."

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