ECB lifts key rate to highest since early 2001 in inflation fight

The European Central Bank on Thursday raised borrowing costs a quarter percentage point, taking a key rate to its highest level since early 2001 as its battle against surging inflation reached the one-year mark.

The central bank's ninth straight increase took the closely-watched deposit rate to 3.75 percent -- a level last seen in May 2001 and equal to its previous record high.

Borrowing costs have risen at their fastest pace ever in the bank's year-long hiking cycle to fight inflation.

In all, key rates have risen by 4.25 percentage points since the ECB made its first move in July last year after Russia's invasion of Ukraine sent prices for energy and food soaring.

Inflation was "still expected to remain too high for too long", the ECB said in a statement announcing its latest decision.

Consumer prices in the eurozone rose at 5.5-percent pace in June -- down from last year's double-digit peak but still well above the ECB's two-percent target.

The ECB decision came a day after the US Federal Reserve resumed its own hiking cycle with a quarter-point raise.

The US central bank signalled it could raise rates again if inflation proved stubborn, while there was growing uncertainty about the ECB's determination to hike further, with the eurozone economy looking increasingly weak.

Collectively, the 20 countries in the currency bloc fell into recession around the turn of the year, shrinking for two straight quarters.