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ECB raises rates, keeps options open

STORY: The European Central Bank raised interest rates again on Thursday (May 4).

It decided to hike by a quarter of a percentage point to 3.25%, as analysts had projected.

The ECB has now lifted rates by a combined 3.75 percentage points since last July - its fastest ever pace of tightening.

But Thursday may not be the last of it, as more action is expected due to growing wage and price pressures.

Though the rate hike comes days after euro zone banking data showed the biggest drop in loan demand in more than a decade.

It suggests previous rate rises have impacted the economy and that ECB policies are now cooling growth.

But the bank gave no guidance on future moves.

Thursday's decision was not an easy one for the ECB.

Policymakers were split ahead of the meeting between whether to go with a 25 or 50-basis-point rise.

Markets had bet on the smaller increase due to soft data in recent weeks.

The euro zone economy barely grew last quarter and banks tightened access to credit.

That raised the risk of a trend that could turn into a credit crunch and drag growth down further.

Underlying inflation has also stopped rising for now, but economists say it could take years to come back to its 2% target.