European Central Bank diverges from Fed, raising rates to highest in 22 years

The European Central Bank on Thursday announced it is taking its main rate up by 25 basis points to 3.5%, diverging from a U.S. Federal Reserve decision to pause its own hikes on Wednesday.

The central bank has raised rates since July 2022 in an attempt to bring down record-high inflation across the region. The latest inflation reading showed prices cooling down at a faster-than-expected pace, with headline inflation coming in at 6.1% in May and core inflation — which excludes volatile items — at 5.3%. This remains well above the ECB’s target of 2% headline inflation.