MercoPress. South Atlantic News Agency

Euro zone rate up 25 points to 3.75%; unchanged in UK

The European Central Bank raised its key interest rate 25 points to 3.75% in an attempt to keep inflation under control and in the United Kingdom the Bank of England left rates unchanged at 5.25%.

ECB president Jean Claude Trichet said the decision was taken "in view of the upside risks to price stability over the medium term that we have identified through both our economic and monetary analyses". "Today's decision will contribute to ensuring that medium to longer-term inflation expectations in the euro area remain solidly anchored at levels consistent with price stability", added Mr. Trichet. The quarter point rise was widely expected by analysts and takes the eurozone rate to its highest level in five-and-a-half years. With Europe's leading economies performing strongly, some analysts believe rates could hit 4% before the end of the year. Figures published last week actually showed a downward revision in January's eurozone inflation from 1.9% to 1.8% - below the ECB's 2% target. Nevertheless, with unemployment levels falling in Germany and France and business confidence on an upward curve across the eurozone, experts believe policymakers do not want to take any chances with price stability. "After today's increase, given the favorable economic environment, our monetary policy continues to be on the accommodative side, with the key ECB interest rates moderate, money and credit growth vigorous, and liquidity in the euro area ample by all plausible measures", said Mr. Trichet. ECB president underlined that the strength of real GDP growth in the fourth quarter (0.9%) is indicative of ongoing robust growth in the euro zone. "Both domestic demand and exports made significant contributions to real GDP growth confirming the sustained and broad based nature of the current expansion". However in the UK in spite of the good news for borrowers this month, analysts believe another rate rise is in the making. UK inflation fell to 2.7% in February, down from an eleven year high of 3%, but still well above the 2% annual target. Quarter point rate rises were decided in August, November and January.