The bank also said it plans to end its 20-billion-euros a month bond-buying program next month.The ECB is tightening its monetary policy to try to tame inflation, which hit a record 8.1% last month.
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European Central Bank will hike interest rates by 25 basis points and end its bond-buying program in July
The European Central Bank said it will raise interest rates by 25 basis points in July.
European Central Bank president Christine Lagarde.
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The European Central Bank said Thursday it will hike interest rates for the first time since 2011 at its meeting next month.
The bank said it intends to raise rates by 25 basis points and will end its bond-buying program on 1 July.
The ECB also left the door open for a larger hike in September, as it tries to bring soaring inflation under control.
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"Looking further ahead, the Governing Council expects to raise the key ECB interest rates again in September," the central bank said in a statement.
"The calibration of this rate increase will depend on the updated medium-term inflation outlook. If the medium-term inflation outlook persists or deteriorates, a larger increment will be appropriate at the September meeting."
The ECB has been buying bonds at a pace of 20 billion euros ($21.5 billion) a month in an effort to support financial markets and the economy during volatile times.
But with inflation running at a record high of 8.1%, the central bank is now rapidly dialing down its stimulus measures.
The move to end the asset purchase programme (APP) which began in 2014 clears the way for the ECB to hike interest rates from the current record-low level of -0.5%.
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The governing council said at its April meeting that it would only raise rates once the APP had finished.
"High inflation is a major challenge for all of us," ECB president Christine Lagarde said. "Prices have also gone up more strongly because of renewed supply bottlenecks and because of recovering domestic demand, especially in the services sector, as our economy reopens."
The ECB is following in the footsteps of the Federal Reserve and the Bank of England in ending its asset purchase program.
The Fed and BoE have both stopped asset purchases and are now reducing their bond holdings, as they too cut support for their economies in an effort to cool red-hot inflation.
"While the ECB has moved much slower compared to other central banks, their decision today to end asset purchases, shutting the lid on their quantitative easing experiment of the last decade is testament to the global direction of travel now," Charles Hepworth, an investment director at GAM Investments, said.
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