By Tom Fairless

FRANKFURT--The European Central Bank increased its key interest rate by 0.5 percentage point, diverging from the Federal Reserve, and signaled it would raise rates by another half percentage point in March, as resilient economic growth in the eurozone and a rapid reopening of China's economy are expected to keep inflation high.

The ECB's move, its fifth large rate increase in a row, takes its key rate to 2.5%, the highest level since 2008. That is still some way below those of the Fed, which raised rates to 4.5% to 4.75% on Wednesday, and the Bank of England, which increased rates to 4% earlier Thursday.

Investors are watching closely for signs that central banks will pause their rate hikes as inflation starts to decline in a number of large economies and economic growth is expected to buckle, especially in the U.S.

Write to Tom Fairless at tom.fairless@wsj.com

(END) Dow Jones Newswires

February 02, 2023 08:35 ET (13:35 GMT)