The European Central Bank lifted interest rates by a half-point and pledged another such move before officials then take stock of where borrowing costs must go to tame inflation.

Policymakers, as expected, raised the deposit rate to 2.5%, the highest since 2008. They warned that the most aggressive bout of monetary tightening in ECB history isn’t done - even as energy prices plunge and the Federal Reserve moderates the pace of its own hikes.

In a statement, the Governing Council said it “intends” to raise rates by another 50 basis points at its March meeting, then “evaluate the subsequent path of its monetary policy.” The move effectively locks in an increase in rates, while allowing for a potential slowdown or pause if deemed appropriate.

President Christine Lagarde acknowledged that risks to the growth and inflation outlook have become more balanced than previously, calling the economy more resilient than expected.

While conceding that the ECB’s intention to raise by another half-point in March isn’t “irrevocable,” she also said it’s very likely to transpire.

“I can’t think of scenarios, unless they were quite extreme, where that would not happen,” she told reporters in Frankfurt. “Our determination to reach 2% medium-term inflation should not be doubted. Nor should be doubted the fact that once we are in restrictive territory we will want to stay there sufficiently.”

Euro-area bonds extended gains on speculation that the pace of monetary tightening will slow. Money markets added to bets for a half-point increase in March though trimmed wagers on the peak of the tightening cycle to below 3.5%.

Alongside its commitment on rates, the ECB also gave more details on how it intends to shrink its €5 trillion (US$5.4 trillion) bond portfolio, reaffirming a monthly cap of €15 billion between March and June on maturing debt that’s allowed to expire.

Thursday’s announcement follows a slew of encouraging economic data, showing a further retreat in inflation and receding chances of a recession in the 20-member euro zone - despite the war still raging on its doorstep.

It’s been a busy week for central banks. As well as Wednesday’s decision by the Fed to lift rates by a smaller, quarter-point increment, the Bank of England delivered another half-point hike earlier today.

Even after a steeper-than-anticipated slowdown in January, euro-area inflation - at 8.5% - remains more than four times the ECB’s 2% target. What’s more, a measure of underlying price pressures is stuck at a record.

Stubborn core inflation has prompted hawks like Netherlands central bank chief Klaas Knot and Austria’s Robert Holzmann to speculate whether half-point steps should persist into the second quarter - especially as higher borrowing costs are yet to hurt the economy noticeably.

But doves on the Governing Council, who include Italy’s Ignazio Visco and Greece’s Yannis Stournaras, are signaling a preference for more gradual steps, starting as early as March.

They can point to a warm weather-induced drop in natural gas prices, which spiked after Russia invaded Ukraine. The recently announced pause in the Bank of Canada’s tightening cycle gives them further ammunition.

  - Bloomberg