EU follows through on higher interest rates

The European Central Bank said a few weeks ago that it was going to raise short-term interest rates, as noted in this earlier blog post.

Guess what?  They meant what they said.  Last week the ECB raised rates from 1 to 1.25%.  As is the case in the US, the ECB is trying to balance a possible reduction in investment and GDP against the need to adjust interest rates for rising inflation.  The economic situations are not exactly alike -- inflation is currently higher in Europe than it is in the US and unemployment is not as high in Europe as it is here. 

Nonetheless, the days of zero short-term interest rates are probably numbered.  I would be careful about buying any 24 month CD paying 1.5%.