ECB hikes interest rates in exit from crisis policy

Reuters:

The European Central Bank raised interest rates by 25 basis points to 1.25 percent on Thursday, announcing its first hike since July 2008 to counter firming inflation pressures in the 17-countryeuro zone.

The euro and German bund futures were steady after the decision, which ECB policymakers had flagged heavily in advance. All but four of 80 economists polled by Reuters last week expected a 25 basis point rise. 

The increase in the ECB's benchmark refinancing rate marks a gentle exit from the central bank's policy response to the global financial crisis. It had held the refi rate at a record low 1.0 percent since May 2009. "This makes the ECB the first major developed economy central bank to hike rates and the decision will cement its reputation as a single-minded inflation fighter," said ABN Amro economist Nick Kounis. "The hike is unwelcome for peripheral countries, but arguably the core member states were in need of this move already some time ago. In that sense, the timing of the increase is a balancing act, which is part and parcel of the one-size-fits-all monetary policy," he added.