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ECB raises rates to 3.75%
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April 27, 2000: 8:02 a.m. ET
Sinking euro forces central bank to hike by a quarter percentage point
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LONDON (CNNfn) - The European Central Bank reacted to the recent pounding of the euro and raised its key short-term interest rates by a quarter percentage point to 3.75 percent Thursday, in a move that was broadly anticipated by economists.
Immediately after the ECB's decision the euro slipped almost half a cent to $0.9179 from $0.9222 prior to the change, only a fraction above the new low of $0.9160 hit Tuesday.
Continental European stock markets traded in the red all morning, and just after the ECB decision the Xetra Dax index in Frankfurt was 0.3 percent lower at 7,364.72, while France's CAC 40 was 0.5 percent lower at 6,358.54.
Few analysts see the ECB's move as a recipe to cure the euro's ills, with most experts predicting the currency will soon broach the $0.90 mark. Interest rate moves have failed to prop up the currency in the past, noted Claudio Piron, treasury economist at Standard Chartered Bank.
The ECB's governing council was handed a thankless task at its bi-weekly meeting Thursday, facing a "damned if they do, damned if they don't" situation. Political pressure has heated up a notch recently, particularly in Germany, as the ailing currency continues to flounder.
The currency has dropped in value by around a fifth against the U.S. dollar since it was created in 1999 and politicians have demanded action to halt the fall.
The ECB has always maintained that the level of the euro is not its concern, but intervention to bolster the currency could be justified on the grounds that a falling currency tends to result in inflation. The ECB's mandate is to keep inflation in the 11-nation euro-zone under control.
The ECB last raised rates by a quarter percentage point on March 16. 
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European Central Bank
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