The European Central Bank hiked its key rates by 0.25 percentage points for the tenth time in a row since July last year to curb inflation.

The main refinancing rate was lifted to 4.5% and the deposit facility rate to 4%, the ECB's Governing Council in Frankfurt said Thursday.

Asked whether the door remained open for further hikes, ECB President Christine Lagarde said: "Based on our current assessment, we consider that the key ECB interest rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to our target."

Lagarde stressed that the ECB Governing Council will ensure that key interest rates are "set at a sufficiently restrictive level for as long as necessary."

However, she added, the ban is not saying that we have now reached the peak.

Higher interest rates make loans more expensive, which can slow demand and counteract high inflation rates. But because more expensive loans are also a burden on the economy, calls for an interest rate pause have recently become louder.

The ECB said on Thursday that the eurozone's persistently high inflation will likely decline more slowly than forecast three months ago.

For the current year, the central bank now expects an annual inflation rate of 5.6%, compared to the previous estimate in June of 5.4%

The bank foresees an inflation rate of 3.2% in 2024 and 2.1% in 2025.

The ECB's target across the 20-country eurozone as a whole is 2% over the medium term.

The bank stressed that the high-interest rates "will make a substantial contribution to the timely return of inflation to the target."

"The Governing Council’s future decisions will ensure that the key ECB interest rates will be set at sufficiently restrictive levels for as long as necessary," the bank said in a press release.

When it comes to overall economic growth, the ECB now expects the eurozone to grow by 0.7% this year, slightly weaker than the 0.9 % predicted in June.

Last year, inflation in the eurozone was in double digits at times as a result of the Ukraine war, which caused prices for energy and food to soar.

Higher inflation rates erode consumers' purchasing power, and people can afford less for their money. This puts the brakes on private consumption, which is an important pillar of the economy.

The latest data show "how persistent the beast of inflation" is, Germany's Bundesbank President Joachim Nagel recently told the Handelsblatt newspaper.

"We have indeed made a good deal of progress in fighting inflation. But we have by no means reached our target value for inflation."

Germany, Europe's largest economy, shrank for two quarters in a row in the winter and thus slipped into a so-called technical recession.

In the second quarter of 2023, gross domestic product stagnated. Inflation, faltering consumption and a weakening global economy are causing problems for Germany as an export nation.

The renewed interest rate hike is "bad for the economy," criticized executive board member of the German Trade Union Confederation (DGB), Stefan Körzell.

"The current monetary policy is putting the brakes on demand and unnecessarily driving Germany into recession," he said.

The head of the economic research institute IFO, Clemens Fuest, said: "For Germany, the interest rate hike is painful given the contraction of the economy. But the ECB makes monetary policy not only for Germany, but for the eurozone as a whole."

Meanwhile, the head of the German Association of Savings Banks (DSGV), Helmut Schleweis, warned that the ECB should not overdo it with further rate hikes: "Otherwise, it would dampen the economy too much."