Higher Rates Are Hampering Europe

The euro zone economy is turning in its best performance in a decade. But the 3.6% growth rate forecast for this year is still nowhere near U.S. levels. So why does the European Central Bank keep ratcheting up interest rates when the Federal Reserve is happy to hold them steady? On Aug. 31, the ECB pushed up its key refinancing rate by 25 basis points, to 4.5%--the sixth time it has raised rates since last November. That can hardly help fuel the economic growth the euro zone badly needs if it is to close the performance gap with the U.S.--a prerequisite for a stronger euro.

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