STORY: The European Central Bank could be on course for its first interest rate hike in 11 years.

On Thursday (June 9) the central bank ended a long-running stimulus scheme and indicated the hike would come next month, while an even larger move could follow in September.

ECB President Christine Lagarde:

"High inflation is a major challenge for all of us. The governing council will make sure that inflation returns to our 2% target over the medium term."

The ECB said it would end bond buys on July 1 and raise interest rates by 25 basis points later that month.

September's potential hike could go to 50 basis points, but that isn't guaranteed.

"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 our September meeting."

The rise in energy and food prices, and Russia’s invasion of Ukraine, have driven inflation, now running at over 8%.

ECB policymakers have hotly debated how to respond, with some arguing for bigger rate hikes than others.

The ECB announced Thursday it expects inflation to reach 6.8% this year - up from a previous forecast of just over 5%.

Markets now expect even more rate hikes before January, posing awkward questions for Lagarde, who only recently said no increase was likely this year.