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12/1/05

ECB: Monetary policy decisions: ECB lifts rates to 2.25 percent

ECB

ECB lifts rates to 2.25 percent

At today’s meeting the Governing Council of the ECB took the following monetary policy decisions:
1. The minimum bid rate on the main refinancing operations of the Eurosystem will be increased by 0.25 percentage point to 2.25%, starting from the operation to be settled on 6 December 2005.
2. The interest rate on the marginal lending facility will be increased by 0.25 percentage point to 3.25%, with effect from 6 December 2005.
3. The interest rate on the deposit facility will be increased by 0.25 percentage point to 1.25%, with effect from 6 December 2005.

Defying pressure from politicians, business and unions to leave rates on hold to support the euro zone recovery, the ECB lifted its benchmark refinancing rate by 0.25 percentage points to 2.25 percent, ending two-and-a-half years of record cheap credit. Explaining the decision at a media conference, Trichet said the ECB was still concerned about the inflation outlook, and upside risks to price stability had increased, including from oil.

The latest data confirmed the ECB's assumption of a steady economic recovery in the second half of the year, although there were still downside risks, Trichet said, announcing small increases to ECB staff economic forecasts for both growth and inflation in 2005 and 2006, and new forecasts for 2007.

European shares rose 1 percent on Thursday after the European Central Bank raised interest rates, signalling further economic growth in the euro zone.

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