The European Central Bank (ECB) confirmed on Thursday it will end a long-running bond-buying scheme on July 1 and signaled a string of interest rate hikes from July as it battles stubbornly high inflation.

The planned hikes would mark its first interest rate increase in 11 years, as it catches up with other central banks worldwide in pivoting from supporting the economy during the pandemic to squelching soaring consumer prices.

The surprise announcement of two quarter-point increases came after the bank's 25-member monetary policy council met in Amsterdam, saying inflation had become a "major challenge" and that those forces had "broadened and intensified" in the 19 countries that use the euro currency.

The ECB is rolling back stimulus measures it has had in place for most of the last decade and said it will end its economic stimulus program next month.

The move underlines concerns about the level of annual consumer price increases, which hit a record-high 8.1% in May, the highest since statistics started in 1997. The bank’s target is 2%.

The central bank aims to stop rapid price growth from seeping into the broader economy and becoming perpetuated via a hard-to-break wage-price spiral.

Following up on a long-promised move, the ECB said it would end its Asset Purchase Program, its main stimulus tool since the eurozone debt crisis, and said it would raise rates by 25 basis points in July, then move rates again in September.

It held out the possibility that it would make a more drastic, half-percentage-point increase in September rather than the more usual quarter-point adjustment, saying that if the inflation outlook persists or deteriorates, "a larger increment will be appropriate at the September meeting."

The ECB's deposit rate now stands at minus 0.5% and ECB chief Christine Lagarde has said it could be back at zero or slightly above by the end of the third quarter.

Markets, however, expect even more aggressive action, pricing in 135 basis points of hikes by the end of this year, or an increase at every meeting from July, with some of the moves in excess of 25 basis points.

The bank has not raised rates in 11 years and the deposit rate has been in negative territory since 2014.

The U.S. Federal Reserve (Fed) raised its key rate by a half-point on May 4 and has held out the prospect of more such large increases. The Bank of England (BoE) has approved hikes four times since December.

The prospect of rapid central bank rate increases has sent shudders through stock markets, as higher rates would raise the returns on less risky alternatives to stocks. Raising rates in Europe is also complicated by weakening prospects for economic growth as Russia’s war in Ukraine sends shock waves through the global economy.

Higher rates can make credit more expensive for businesses. The bank’s statement said, however, that the path of increases would be "gradual but sustained."

The monetary policy meeting was held in Amsterdam as one of the bank’s occasional gatherings away from its headquarters in Frankfurt, Germany.

"High inflation is a major challenge for all of us," the bank said in its policy statement. "The governing council will make sure that inflation returns to its 2% target over the medium term."

Higher rates are the usual tool to combat inflation. By raising its benchmarks, the central bank can influence what financial institutions, companies, consumers and governments have to pay to borrow the money they need. So higher rates can help cool off an overheating economy.

But higher rates can also weigh on growth. That makes the ECB’s job a delicate balance between snuffing out inflation and blunting economic activity.

The ECB on Thursday slashed its growth projection for this year to 2.8% from 3.7%.

It raised its outlook for inflation, saying that price increases would average 6.8% this year, higher than the 5.1% forecast in its March outlook, while the crucial forecast for 2024 was raised to 2.1% from 1.9%. That is significant because it indicates the bank sees inflation as above target for several years, a strong argument for more rate increases.

An ECB move to attack inflation has raised concerns about the impact of higher interest rates on heavily indebted governments, most notably Italy.

The rate hikes end an extended period of extremely low rates that started during the global financial crisis in 2009. The increases would start from record lows of zero for its lending rate to banks and minus 0.5% on overnight deposits from banks.