The European Central Bank raised interest rates for the first time in more than a year on Thursday, in a widely expected quarter percentage-point move which took benchmark rates to 4.25 percent, the highest level since September 2001. The ECB acted after euro zone inflation accelerated to 4.0 percent year-on-year last month, more than double the bank's medium-term goal. ECB President Jean-Claude Trichet will explain the decision at a news conference at 1230 GMT. “This move is largely a symbolic gesture aimed at getting inflation expectations down,” said Dario Perkins, European economist at ABN Amro. “I get the feeling that markets are starting to question the inflation credibility of the (US) Federal Reserve and the Bank of England. The signal the ECB are sending today is that they are serious about their anti-inflation mandate,” he added. Markets were little changed after the decision. Economists are keen to know if this marks the start of a campaign of rate rises, despite growing signs of a slowdown in the euro zone economy. Several ECB policymakers have said they do not plan a series of increases and most economists see little further scope for tightening as the growth outlook deteriorates. But markets are betting on rates hitting 4.5 percent by the year-end, and some traders had even seen a chance of a half percentage point move on Thursday. “It's a bit of a tightrope at the moment,” said Dresdner Kleinwort economist Rainer Guntermann. “In the current uncertain environment, with growth and inflation risks both clearly evident, I would be surprised if there is any guidance given beyond August, but from that point of view they will leave their options open.”
