The European Central Bank raises its benchmark rate by 25 bps

As it was expected before today the European Central Bank has raised its benchmark rate by 25 basis points to 1.25% for the first time since July 2008. The ECB also increased its deposit rate by 25 basis points to 0.50%, and raised its marginal lending rate to 2.0 percent from 1.75%. This decision can become fatal for the countries with weaker economy, such as Greece, Ireland and Portugal which yesterday has asked for an international bailout.  

According to the analysts we will witness one or two more such hikes by the end of this year. As per Nomura forecast the benchmark will raise to 2.75% by the end of 2012.  

At the same time many economists assure of uselessness of the hike. According to the inflation is not a great problem in view of the fact that plants and factories are still not operating at full capacity.  

This rate increase is the first case in 40 years when Europe raised its refinancing rate ahead of the Federal Reserve.