In an effort to rein in skyrocketing inflation that is eroding savings and reducing corporate earnings, central banks throughout Europe increased interest rates on Thursday, some by amounts that stunned the markets. They also hinted at further higher borrowing costs to come.
Inflation has spread to include everything from food to services, with double-digit readings in certain parts of the continent, originally driven by surging oil costs in the wake of Russia’s invasion of Ukraine.
In some regions, these levels have not been observed since the immediate aftermath of the oil crisis of the 1970s. Just hours after their American counterpart, the Federal Reserve, raised rates by the greatest in nearly three decades, the Swiss National Bank and the National Bank of Hungary both surprised the markets with significant higher moves.
In the meantime, the Bank of England increased borrowing costs by the quarter-point that the markets had anticipated. The actions came barely a day after the European Central Bank approved plans in an emergency meeting to lower borrowing costs in the southern regions of the EU so that rate increases in July and September could proceed as planned.
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