ECB keeps interest rates on hold

The European Central Bank (ECB) has today elected to keep interest rates on hold at 1.25% but hinted that rates may rise again next month.

In April, the ECB lifted rates from 1% to 1.25% in a bid to tame rising inflation in the 17-member euro zone – it was the first time in almost two years that rates had been raised.

At the press conference today, ECB president Jean-Claude Trichet said: “we are in a mode where there might be in the next meeting an increase of rates…..but we are never pre-committed.”

Last month, inflation in the euro zone rose to 2.7% - above the ECB’s target of just below 2%.

Many major economies are battling with higher inflation, which is rising due to higher energy, commodity and food prices.

Many central banks across the world have lifted interest rates in a bid to tame inflation and the problem is particularly rife in Asia.

The news comes shortly after the Bank of England opted to keep interest rates at the historic low of 0.5% despite inflation being more than double its 2% target.

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