European Central Bank raises rate to fight inflation

The European Central Bank increased its benchmark lending rate by a quarter of a percentage point to 4.25 per cent on Thursday.

Like other central banks, the ECB has shifted from stimulating the economy by cutting rates to worrying about inflation. Both the U.S. Federal reserve and the Bank of Canada held rates stable in their most recent decisions because of concern about rising prices.

Inflation may remain high "for a more protracted period than previously thought," ECB president Jean-Claude Trichet told reporters Thursday.

He had earlier said the rate would be increased to help stabilize prices.

Trichet did not indicate whether further increases are likely.

Inflation in the 15 euro countries rose to four per cent annually in June, double the ECB's target.

The ECB is the central bank for the European Union (EU) countries which have adopted the euro. That excludes Britain, Denmark and Sweden and some Baltic and Eastern European countries, while Switzerland and Norway are not EU members.

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