The European Central Bank has increased its benchmark rate to 3.5%, up 0.25 percentage points, making borrowing more expensive as it said inflation has been "too high for too long".

Rates will continue to increased, the ECB signalled.

"Are we done? Have we finished the journey? No, we're not at destination," ECB president Christine Lagarde said.

"It is very likely the case we will increase rates in July."

In new forecasts released by the regulator it said it will be two more years before inflation is brought down to its 2% target.

Latest figures show inflation was 6.1% in the countries using the euro and will only fall to 5.1% this year and 3% in 2024.

It's still lower than the UK rate of price increases which stands at 8.7%.

The economic area was in recession over winter. Last week, revised data from the European statistics office, Eurostat, showed the eurozone economy contracted 0.1% in the first three months of this year and the final three months of 2022.

At the same time as the economy was stagnating, wages were rising. Pay per employee increased 5.2% in the first three months of the year and 4.8% in the final three months of 2022, ECB data showed.

Growth will remain weak throughout this year, it ECB said.

The ECB is just one of the central banks across the world increasing rates to depress economic activity and bring down soaring inflation.

On Wednesday the US Federal Reserve held rates after ten consecutive rises and in the UK the Bank of England is projected to bring its base rate to 4.75% next Thursday.

Inflation began to increase as COVID-era supply chain problems pushed prices up and Russia's invasion of Ukraine caused energy prices to reach record highs.