ECB expected to raise interest rate to 4.25%

Angela Jameson and Gary Duncan European markets fell to their lowest level for three years in anticipation of an expected rate rise from the European Central Bank (ECB) today. Rates are expected to rise from 4 per cent to 4.25 per cent, as the bank moves to control inflation which is at record levels. The increase, which was foreshadowed yesterday in comments by Jean-Claude Trichet, the President of the ECB, will be the first for a year but is not without controversy as many critics believe it will have little impact on soaring global food and fuel costs, which are driving inflation. There are also fears that oil prices could rise even further if there is an increase in European interest rates, as investors perceive that a rising euro will weaken the dollar. When the dollar falls, investors have tended to switch into oil.... [read full story]