8 Apr 2011

Eurozone interest rates rased from record low

8:36 am on 8 April 2011

The European Central Bank has raised its main interest rate for the first time since 2008.

The increase to 1.25% from the record low of 1% is intended to tackle rising inflation.

The bank has a target of inflation of below 2%, while the most recent figure for the euro area is 2.6%, the BBC reports.

The increase in eurozone interest rates had been widely expected by markets and had been expected to mark the start of a series of rate rises by the ECB.

However ECB president Jean-Claude Trichet said the bank "did not decide" that it was the first of a series.

There are worries that the rise will cause problems for the eurozone's weaker economies, such as Portugal.

While Germany has enjoyed a strong rebound in growth, the economies of Greece, the Republic of Ireland, Portugal and arguably Spain remain trapped by large debts, high unemployment, weak consumer spending and uncompetitiveness, the BBC says.