ECB and Bank of England fight inflation with sharp interest rate hikes

• Europe’s two largest central banks raised interest rates sharply on Thursday, opting for bigger increases than the US Federal Reserve as inflation in the region remains near historically high levels.
• The European Central Bank (ECB) and the Bank of England lifted rates by another half a percentage point. Benchmark interest rates for both are at their highest levels since 2008. While the Federal Reserve eased up on rate hikes on Wednesday, delivering just a quarter-point increase as it judged that it was making progress in its battle against inflation.
• The ECB said it expected to raise interest rates further and intended to hike them by another half a percentage point in March. Although inflation in the 20 countries that use the euro slowed in January, at 8.5%, it remains far above the bank’s 2% target. Speaking to reporters after the announcement, ECB President Christine Lagarde noted recent steep falls in energy prices but said the fight to tame inflation had further to go.
• UK inflation has also eased, coming in at 10.5% in December, but remains near a 41-year high. The Bank of England has a particularly tough job on its hands: prices are rising rapidly while at the same time, the United Kingdom faces a risk of recession, and rate hikes act to dampen both inflation and economic growth. 
• On Tuesday, the International Monetary Fund forecast that the United Kingdom would be the only major economy to contract this year. “The labour market remains tight and domestic price and wage pressures have been stronger than expected, suggesting risks of greater persistence in underlying inflation,” the bank said in a statement.

(Source: CNN)