Europe's central bank to join global push for higher rates

FRANKFURT, Germany (AP) — The European Central Bank on Thursday will join the U.S. Federal Reserve and other major central banks in raising interest rates. The only question is by how much — and whether the rush to make credit more expensive will tip Europe and other major economies into recession at the price of fighting record inflation.

ECB President Christine Lagarde said last month that the bank would raise rates for the first time in 11 years by a quarter-percentage point at Thursday's meeting and by at least that much in September. That led to talk of a half-point increase ahead for the 19 countries using the euro currency, and analysts say a larger hike could come Thursday, too.

The ECB is coming late to the party in its rate liftoff — a token of inflation that turned out to be higher and more stubborn than first expected and of the shakier state of an economy heavily exposed to the war in Ukraine and a dependence on Russian oil and natural gas. Recession predictions have increased for later this year and next year as soaring bills for electricity, fuel and gas deal a blow to businesses and people's spending power.

“The economic outlook is worsening by the day," said Carsten Brzeski, chief eurozone economist at ING bank. “At the same time, headline inflation is still increasing and in our view will only come down gradually towards the end of the year, if it comes down at all. In hindsight, the very gradual and cautious normalization process the ECB started at the end of last year has simply been too slow and too late.”

Recession concerns have helped push the euro to a 20-year low against the dollar, which adds to the ECB's inflation fighting task by worsening already high energy prices. That is because oil is priced in dollars.

Raising rates is seen as the...