What's going on?

The European Central Bank (ECB) announced on Thursday that it�ll finally be hiking interest rates next month.

What does this mean?

Inflation in the Eurozone hit another record high for the third month in a row in May, with prices 8.1% higher than the same time last year. That�s a long way off the ECB�s official target of 2%, and it�s forced the central bank to cave into long-rejected measures. First, it confirmed it�s on track to halt its bond-buying program in July. Then it said that it�ll be raising interest rates by 0.25% next month, despite having previously said it wouldn�t do anything of the kind this year. It even left the door open for a bigger hike in September, which shows how serious it is about the problem at hand: it�s been more than a decade since it last hiked rates, and marks a turnaround from an eight-year policy of negative rates and mass bond-buying (tweet this).

Why should I care?

Zooming in: The ECB fiddled while Rome burned.
This rate hike will still leave the ECB way behind the 60-odd other central banks that have already raised rates this year, which is understandable: it�s been trying to rein in inflation amid a backdrop of war that�s hit Europe particularly badly. Trouble is, this hesitancy seems to have made matters worse: the ECB is now expecting inflation to be 6.8% this year, and economic growth to be 2.8% � compared to its previous forecasts of 5.1% and 3.7%.

The bigger picture: Make sure Rome doesn�t burn to the ground�
Economists at BlackRock think rates will rise more slowly than investors are expecting once they break into positive territory. After all, the ECB can�t risk doing more than it absolutely has to: consumer confidence in the eurozone is already near all-time lows, while the eurozone�s most indebted members � we�re looking at you, Italy � are much more sensitive to increases in borrowing rates.