The European Central Bank on Thursday increased its benchmark interest rate by 25 basis points as it continues to fight a surge in consumer prices, with rates now at levels not seen since November 2008.

The decision comes after inflation figures released earlier this week showed an increase in the headline rate to 7% for April. At the same time, core inflation, which excludes food and energy prices, decreased slightly to 5.6%. "Headline inflation has declined over recent months, but underlying price pressures remain strong," the central bank said Thursday.

The ECB embarked on its current hiking path in July 2022, when it brought its main rate from -0.5% to zero. However, despite consistent rate increases since, inflation remains well above the ECB's target of 2%. Estimates published last week by the International Monetary Fund suggest that inflation will not reach the ECB's target until 2025.

Recent data also shows that the euro zone economy grew less than expected in the first quarter of the year, registering an anaemic GDP of 0.1%. However, unemployment numbers showed a slight improvement in March from the previous month at 6.5%.

Furthermore, a recent ECB survey showed that banks have significantly tightened access to credit, which could suggest that higher interest rates have started to take its toll on the real economy.

Across the pond, the Federal Reserve unanimously voted to increase interest rates for the tenth consecutive time, in keeping with their monetary tightening policy. This move has officially brought US interest rates into the 5% to 5.25% range, marking their highest point since August 2007.

The decision of the May meeting was closely watched, as analysts and experts alike believed it would be the final interest rate hike. Fed chairman Jerome Powell stated that no decision on a pause had been made, but investors noted the softer language used in the Fed's statement regarding future rate hikes. The statement read, "the Committee anticipates that some additional policy firming may be appropriate."

The Fed's decision on interest rates in the June meeting may be influenced by incoming data on jobs, the consumer price index, and inflation. However, Powell indicated that the Fed is unlikely to introduce any rate cuts in 2023 as inflation is expected to take some time to stabilize.