European Central Bank Hikes Interest Rate Quarter Point

Brussels, Belgium (AHN) - The European Central Bank hiked its main interest rate to 4.25 percent on Thursday. The ECB council raised its benchmark refinancing rate for the 15-member eurozone by 25 basis points.

The announcement did not surprise EU members since ECB President Jean-Claude Trichet hinted of a rate adjustment in June to respond to the eurozone inflation rate which hit 4 percent that month. Trichet, in a press conference, explained, "The monetary policy stance after today's decision will contribute to achieving our objective of price stability."

Last week senior ministers from Germany, Spain and France warned the ECB against raising interest rates because it could stifle growth. German Finance Minister Peer Steinbrueck told Der Spiegel, "The ECB has to consider that they could possibly send the wrong signal with an interest rate increase because it could have a pro-cyclical impact at a point when the economy is slowing down."

Since the rate increase has been accepted as unavoidable given the record-high eurozone inflation rate and soaring fuel prices, the next step that the financial markets are waiting for is Trichet's press briefing on the future plans of ECB.