The 75-basis point rate hike was a huge ECB standards, but it's still basically spitting into the ocean when it comes to battling eurozone inflation. European inflation is worse than US inflation. The official CPI came in at a record 9.1% in August. This rate hike brings the eurozone interest rate to 1.25%. Given that it was below zero at the beginning of the year, the ECB is taking a pretty aggressive stance. But even with the hiking, the real interest rate is still -7.85%. That's not going to slay 9.1% inflation.

Euro weakness has contributed to the high eurozone CPI. The euro traded below parity with the dollar for a good part of last week until a small rally after the ECB announcement. Peter said euro weakness is also one of the reasons US inflation isn't even higher.