ECB hikes rates as inflation still on pace to be 'too high for too long'

July 27 (UPI) -- The European Central Bank Thursday raised interest rates a quarter point to continue the battle against inflation.

The ECB made the decision to raise all three key interest rates by 25 basis points bringing the rates for refinancing, marginal lending and deposits to 4.25%, 4.50% and 3.75% respectively.

"Inflation continues to decline but is still expected to remain too high for too long," ECB President Christine Lagarde said in a statement. "We are determined to ensure that inflation returns to our 2% medium-term target in a timely manner."

The bank said it expects inflation will continue to drop for the rest of 2023, but will still stay above the 2% target "for an extended period."

"While some measures show signs of easing, underlying inflation remains high overall," said Lagarde. "The past rate increases continue to be transmitted forcefully: financing conditions have tightened again and are increasingly dampening demand, which is an important factor in bringing inflation back to target."

In June Lagarde said inflation had gone down to 6.1% from a peak of 10.6% in the eurozone, but forcing it down to the target of 2% would mean rising interest rates will continue.

She said the bank is committed to the target rate "come what may."

Thursday the bank reiterated its future decisions will be consistent with that goal.

"Future decisions will ensure that the key ECB interest rates will be set at sufficiently restrictive levels for as long as necessary to achieve a timely return of inflation to the 2% medium-term target," the bank's statement said.

For consumers this means no end to the tighter money policies impacting everything from loans to savings interest rates. It makes buying on credit more expensive, including mortgages and new cars.