London (CNN Business)In a bold attempt to get inflation under control, the European Central Bank on Thursday announced it would hike its key interest rate by a half percentage point.
That marks the first time since 2011 that the ECB has raised rates, and takes Europe’s main rate back to zero. Rates in the region have been negative since 2014.
The move, which takes effect on July 27, comes as Europe battles record inflation fed by surging energy prices. Annual inflation in the European Union jumped to 9.6% in June. It reached 8.6% for the 19 countries that use the euro.
The central bank had previously said it would increase rates by a smaller margin, but decided it needed to be more aggressive based on an “updated assessment of inflation risk.”
The ECB also unveiled a new tool aimed at keeping a lid on borrowing costs in highly indebted countries in the euro zone, such as Italy and Greece, part of its effort to maintain cohesion within the region.
The so-called Transmission Protection Instrument “can be activated to counter unwarranted, disorderly market dynamics that pose a serious threat to the transmission of monetary policy across the euro area,” the central bank said.