ECB raises key interest rate to 4.25% to tackle inflation

FRANKFURT, July 3 Kyodo - The European Central Bank decided Thursday to raise its key interest rate to 4.25 percent per annum from 4.0 percent in a widely expected move to stem growing inflationary pressure in the 15-nation eurozone.
The rate hike by the ECB's Governing Council is the first since it lifted the benchmark interest rate from 3.75 percent in June 2007.
The decision to increase borrowing costs underlined the fact that the ECB places priority on controlling rising inflationary pressures amid surges in food and energy prices despite a slowdown in some parts of the eurozone.
The consumer price index for the eurozone rose 4.0 percent in June from a year earlier on a preliminary basis, marking the highest growth since the introduction of the single European currency in 1999.
The current inflation rate is twice as high as the target inflation rate set by the ECB in steering its monetary policy.
With the ECB lifting the key rate to 4.25 percent, the gap in benchmark interest rates between the eurozone economy and the United States rose to 2.25 percentage points -- the largest on record.
The U.S. Federal Reserve decided in June to leave its key short-term target rate steady at 2.00 percent.
Analysts said widening rate differentials between the eurozone economy and the United States could fuel dollar-selling pressure and trigger further hikes in crude oil prices.