The European Central Bank surprised the market with a 50 basis point rate hike on Thursday, bringing its policy rate to zero.
The ECB had kept its benchmark at a negative territory since 2014 amid the region’s sovereign debt crisis and the coronavirus pandemic. Thursday marked the first rate hike in 11 years in a sign of acknowledgment on rising inflation in the bloc.
“The Governing Council judged that it is appropriate to take a larger first step on its policy rate normalisation path than signalled at its previous meeting,” the ECB said as majority polls indicated that the ECB would increase the rate by 25 basis point.
The Eurozone recorded a spike in annual inflation at 8.6% in June, the highest level on record. The number marked a significant jump from 8.1% in May.
