European Central Bank raises rates to a record 4% despite recession fears

Interest rates in the eurozone have been hiked to a record high despite fears the region is hurtling towards recession.

The European Central Bank raised its benchmark rate from 3.75pc to 4pc – the highest level since the single currency was launched in 1999.

It was the tenth hike in 14 months and came as concerns about bringing inflation under control trumped worries about the economic malaise gripping the bloc, particularly Germany.

Against the bleak backdrop of stagflation and worries about recession, the ECB signalled that this most recent hike was likely to be the last. When rates in the eurozone started rising last July, they were in negative territory at minus 0.5pc, meaning banks had to pay to park their cash with the ECB.

The Bank of England is facing a similar dilemma ahead of its decision next week.