JUST IN - Euro slips against dollar after ECB raises key rate to 2.5%

Euro falls against the dollar after ECB lifts rate

The euro slipped against the dollar after the European Central Bank lifted rates by half a percentage point and said it intended to replicate the move at its next meeting in March.

Although the ECB’s decision was widely expected, the euro fell 0.15 per cent to $1.097 shortly after the central bank’s announcement, which took its deposit rate to 2.5 per cent.

In fixed income markets, the 10-year German Bund yield, a regional benchmark, slipped to 2.16 per cent, having weakened 0.13 percentage points throughout the day.

The yield on the equivalent Italian government bond traded 0.23 percentage points lower at 4.05 per cent.

The region-wide Stoxx 600 index held on to earlier gains, up 0.5 per cent.

ECB raises key rate by half a percentage point to 2.5%
Delphine Strauss in London

The European Central Bank raised interest rates by half a percentage point on Thursday, in a sign of its concern that inflation will remain high despite the recent fall in energy prices.

The widely expected increase took the ECB’s benchmark deposit rate to 2.5 per cent, its highest level since the global financial crisis.

The ECB’s move followed a half-point increase by the Bank of England earlier on Thursday and a quarter-point rise on Wednesday by the US Federal Reserve.