European Banks Hike Lending Rate
The Bundesbank, West Germany’s central bank, today raised its key lending rates by 1%, and other European central banks quickly followed with similar rate hikes.
The move appeared to be aimed at curbing inflation and supporting European currencies, which have weakened against the dollar despite concerted central bank intervention in recent days.
The announcement by the Bundesbank sent the dollar sliding. In Frankfurt, the U.S. currency dropped to 1.8653 marks from 1.8760 in early morning trading. In London the dollar, which had risen against the pound on Wednesday, fell to $1.6165 from $1.6055.
The Bundesbank set the new discount rate at 6%, with the Lombard rate at 8%. It was the fourth interest-rate rise this year for the West German central bank.
Meanwhile, central banks in Britain, Austria and the Netherlands raised their rates by 1% to 15%, 6.5% and 7% respectively.
The Bank of France increased its key rate to 9.5%, and the Swiss National Bank boosted its discount rate by a half percentage point to 6%.
Some commercial banks in Europe followed the central banks’ announcements with rate increases of their own.
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