Why did the European Central Bank raise interest rates so soon?

The European Central Bank's quarter point interest rate increase has been called 'counter-productive,' 'unnecessary,' even 'self-defeating.' All of which begs the question, why did the ECB last Thursday increase interest rates so soon? (The ECB increased its key interest rate, the refinance rate, a quarter point to 4.25%, last Thursday.) One argument is euro zone inflation, presently running at about a 3.7% annualized rate. That's well above the ECB's 2% inflation limit. The aforementioned would seem to be enough to justify a monetary tightening, but don't tell that to economist Mark Chandler, who argues an evaluation of just the top-line euro zone price data constitutes a superficial analysis. Price increases in the euro zone's border or outer nations are less than that, he said. Similarly, the euro zone's GDP growth rate is... [read full story]