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ECB hikes interest rates (July 7, 2011)
The European Central Bank raised its key interest rate Thursday, in a continuing effort to fight inflation.The ECB's key interest rate is now 1.50%, up from the previous 1.25% rate set in April.In a press conference following the announcement, ECB President Jean-Claude Trichet said it's of "paramount importance," that the rise in inflation, led by higher energy prices, does not become broad based.Global investors closely watch the language of central bankers for code words indicating possible changes to monetary policy down the road.In June, Trichet said he was "strongly vigilant" about inflationary pressures -- which made today's rate hike come as hardly a surprise. Trichet did not repeat that language on Thursday.At a press conference, reporters pelted him with questions about the debt crisis facing Europe's so-called periphery countries Greece, Ireland, Portugal and Spain.Higher interest rates make it more expensive for these countries to pay off their debts.Trichet repeated several times Thursday that the ECB is acting in the best interest of the 330 million people in the euro zone's 17 countries. He believes that keeping inflation under control for the area as a whole is essential to maintaining the ECB's credibility.
