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Interest rates pushed up in euro zone despite crisis

Interest rates were raised by the European Central Bank for the first time in nearly three years. But higher interest rates make it harder for struggling EU economies.

By Associated Press / April 7, 2011

Jean-Claude Trichet, president of the European Central Bank, answers reporter's questions during his monthly news conference at the ECB headquarters in Frankfurt, Germany, April 7, 2011. Trichet announced that the ECB will increase interest rates by 25 basis points.

Kai Pfaffenbach/Reuters

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FRANKFURT, Germany

European Central Bank President Jean-Claude Trichet is saying Europe faces continuing inflation risks despite the economic difficulties in Portugal, Greece and Ireland.

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His comments Thursday came after the bank raised its key rate Thursday by a quarter percentage point to 1.25 percent from 1 percent — the bank's first increase in nearly three years.

Trichet says inflation risks "remain on the upside" and that the bank would "monitor very closely" future price developments.

The bank must find a compromise between raising interest rates to prevent inflation as Europe's economy recovers and supporting crisis-hit countries and their banks. Portugal has asked for a financial rescue loan so it can pay its debts. Greece and Ireland have already been bailed out.

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