The European Central Bank (ECB) diverged from the Federal Reserve by increasing its key interest rate by 0.5% points and indicated it would impose a similar increase in March as well. This was done because robust economic growth in the eurozone and a rapid reopening of China’s economy is expected to keep inflation high.

The ECB has been increasing interest rates at a record pace in order to combat a sudden bout of high inflation in the eurozone. This comes as a byproduct of a number of factors, including the aftermath of the Covid-19 pandemic and an energy crisis that followed Russia’s invasion of Ukraine. With this move, the ECB raises its benchmark rate to 2.5%, the highest level since 2008. It still falls well short of the rates set by the Fed, which boosted them to 4.75% to 4.50% on Wednesday, and the Bank of England, which raised them to 4% earlier on Thursday.