Stock markets fell across Europe yesterday following hawkish comments from European Central Bank president Jean-Claude Trichet and the unexpected decision of the Bank of England to raise rates, writes Dominic Coyle.

Irish stocks did not escape the trend, shedding close to €600 million in value. However, Dublin fared better than many other markets, particularly London where the FTSE 100 lost 1.6 per cent of its value. The ECB raised rates by a quarter percentage point for the fourth time in eight months to leave them at 3 per cent. However, analysts interpreted comments by Mr Trichet, announcing the move, as signalling a further quarter point rise in October and December.

Earlier, the Bank of England move wrong-footed markets by raising rates by a quarter point to 4.75 per cent. Most analysts expected the bank to wait until the end of the year to tighten monetary policy. The world's leading central bankers are now as one in tightening monetary policy. Yesterday's European rate rises swiftly followed the Bank of Japan's move to end its long-standing zero interest rate policy and the US Federal Reserve's quarter-point rate rise to 5.25 per cent late last month.

Central bankers believe that four years of rapid global growth, high energy prices and historically low interest rates have led to mounting inflationary pressure worldwide.

ECB president Jean-Claude Trichet, speaking in Frankfurt, said the bank's governing council would "continue to monitor very closely" price rises and economic growth in the 12-member currency area.

He said that if the euro-zone economy performed as the bank expected, "a progressive withdrawal of monetary accommodation will be warranted". - (Additional reporting Financial Times service)