Europe's central bank raised its interest rate

... but rates are only part of the job

The European Central Bank (ECB) raised interest rates by 50bp, the first increase in 11 years. Consumer prices have risen 8.6% in the past year, forcing the bank to do something. Russia’s invasion of Ukraine has created an energy crisis, and consumer confidence indicators are already pointing to a slowdown. Increasing the rate will strain public and private spending, but inflation needs to be controlled. It is unclear whether the bank will keep raising the rate.

Rates are only part of the job. Christine Lagarde, and her troop of central bankers, must also figure out how they will buy bonds to prevent the yields of highly indebted countries from exploding and triggering a debt crisis—all without stoking inflation. Italy looks particularly shaky. The government owes a lot, and the prime minister, Mario Draghi, has resigned.