(Bloomberg) — European Central Bank renews its commitment to stop bond-buying over the next few months as record inflation raises chances it will also increase interest rates. This is the first time since more than 10 years ago.

Thursday’s Governing Council meeting reiterated its decision to stop net asset purchases for the third quarter. This was an accelerated timeline that was agreed upon last month, with consumer prices rising at nearly four times the 2% target. It reaffirmed that “gradual” rate hikes will follow “some time after.”

“Inflation has increased significantly and will remain high over the coming months, mainly because of the sharp rise in energy costs,” in a statement. “The Governing Council will take whatever action is needed to fulfill the ECB’s mandate to pursue price stability and to contribute to safeguarding financial stability.”

The ECB’s tightening bets were reduced by the money markets, which priced quarter-point rate increases in September and December. German bonds rose and the yield fell one basis points to 0.75%, after previously climbing to 0.83%.

While still well behind the Federal Reserve and the Bank of England in raising borrowing costs, the faster timetable for withdrawing stimulus underlines the ECB’s focus on taming price pressures — stoked by the war in Ukraine — over risks to the pandemic rebound in the 19-member euro zone.

But with Russia’s invasion complicating the task of forecasting, policy makers are likely to maintain flexibility by awaiting new projections in June before cementing an end-date for asset purchases. Economists believe that the ECB may eventually choose July to cut off and rate rises will occur in December.

Some ECB officials back a similarly tough approach, though others fret that a steadier pace is needed as the conflict saps confidence and the prospect of a ban on Russian energy threatens recessions for economies such as Germany’s — Europe’s largest.

You can follow the conference live on our blog

Christine Lagarde, President of the European Central Bank (ECB), will be giving some insight into this debate at her news conference in Frankfurt at 2:20 p.m.

She’s also likely to be asked about behind-the-scenes preparations for an instrument to deploy if the bond yields of weaker euro-area countries jump excessively as quantitative easing is phased out. 

The ECB’s staff is designing a backstop that would be available for the Governing Council to tackle shocks outside the control of individual governments, people familiar with the plans told Bloomberg last week, though it’s unclear what the tool would look like.

©2022 Bloomberg L.P.