Europe’s central banks hike interest rates to fight inflation surge

• Inflation has spread throughout Europe, fueled by surging oil costs.
• It now affects everything from food to services, with double digit rates in some areas.
• The Swiss National Bank and the National Bank of Hungary both surprised markets with large rate hikes.

LONDON – Central banks across Europe boosted interest rates on Thursday, some by surprising amounts, and hinted at more higher borrowing costs in the future to combat rising inflation, which is eroding savings and straining corporate profits.

Inflation has spread throughout the continent, fueled by surging oil costs in the aftermath of Russia’s invasion of Ukraine. It now affects everything from food to services, with double digit rates in some areas.

In some regions, such levels haven’t been seen since the aftermath of the 1970s oil crisis.

The Swiss National Bank and the National Bank of Hungary both surprised markets with large rate hikes, only hours after the Federal Reserve of the United States raised rates by the greatest in nearly three decades.

Meanwhile, the Bank of England raised borrowing costs by a quarter percent, as predicted by markets.

The actions came barely a day after the European Central Bank agreed in an emergency meeting to keep borrowing prices in the EU’s southern regions under control so that rate hikes could be implemented in July and September.

“We are in a new era for central banks,” said George Lagarias, Chief Economist at Mazars Wealth Management, “where cutting inflation is their main goal, even at the expense of financial stability and GDP.”