European Central Bank hikes interest rates to highest level in 22 years

The European Central Bank raised interest rates by a quarter of a percentage point Thursday, unmoved by recent data showing a mild recession last winter in the 20 countries that use the euro.

The ECB has now hiked rates at eight consecutive meetings since July in a fight against inflation. The latest move takes the benchmark rate in the euro area to 3.5%, the highest since May 2001.

The central bank diverged from the US Federal Reserve, which opted to pause its historic rate-hiking campaign Wednesday after 10 successive increases.

“Inflation has been coming down but is projected to remain too high for too long,” the ECB said in its statement.

Consumer prices in the euro area rose 6.1% in May compared with a year ago — the lowest level since Russia launched its full-scale invasion of Ukraine, sending global energy prices soaring.

Although inflation has eased, it remains well above the ECB’s 2% target.

Rising prices and higher interest rates are increasingly taking a toll on the euro area’s economy, which entered a mild recession around the turn of the year.

That could bolster the case for the central bank to pause interest rate hikes soon. Investors will be on alert for any clues on the future direction of monetary policy when ECB President Christine Lagarde addresses reporters at 08:45 a.m. ET.

Economists polled by Reuters expect the ECB to hike rates by another 25 basis points in July before pausing for the rest of the year.