Nouriel Roubini New York Switzerland UPS Provident COST Nouriel Roubini New York Switzerland

ECB raises eurozone interest rate despite banking sector fears

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The European Central Bank has raised interest rates across the eurozone by 0.5 percentage points, despite fears that higher borrowing costs could set off a domino effect across the financial sector amid fears about the stability of Credit Suisse.Officials at the ECB, the central bank covering the 19-member euro-bloc, said inflation was likely to remain high “for too long”, forcing it to continue with its planned run of rate increases.The 0.5 percentage point rise pushes the central bank’s main refinancing operations rate up to 3.5%, while the rate paid on eurozone bank deposits left at the ECB rises to 3%.Without referencing the overnight rescue loan for Credit Suisse from the Swiss central bank, the ECB said on Thursday that its governing council was “monitoring current market tensions closely and stands ready to respond as necessary to preserve price stability and financial stability in the euro area”.It said: “The euro area banking sector is resilient, with strong capital and liquidity positions.

In any case, the ECB’s policy toolkit is fully equipped to provide liquidity support to the euro area financial system if needed and to preserve the smooth transmission of monetary policy.”The ECB’s rate decision came as European markets recovered from a dramatic sell-off on Wednesday, when fears about the health of Credit Suisse, one of Europe’s biggest banks, wiped more than £75bn off the FTSE 100.Several economists, including Nouriel Roubini, the New York university professor credited with predicting the 2008 banking crash, had warned that a 0.5% interest rise by the ECB could be the trigger for a broad-based solvency problem across the financial industry.Earlier, shares in the Swiss lender had plunged by as much as 30% at

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