According to Governing Council member Robert Holzmann, the European Central Bank might hike rates as soon as the end of next year, and ending bond purchases would be a strong signal that the move would occur within the following two quarters.

Last week, the ECB took another step to reduce crisis-era stimulus when it announced that it will halt emergency bond purchases in March, but would temporarily double the pace of its longer-running Asset Purchase Programme (APP) to help with the transition.

"We can cut or halt the outstanding APP purchases, and if that happens, it will be a price signal to the markets," Holzmann said. "We have established that only after the suspension or cessation of the purchases will interest rates be increased."

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"In an extreme case, it would be conceivable to pause the purchases in a data-driven way this year and even so to speak for the interest-rate hike to occur at the end of this year or the beginning of next year, about at the same time as the third interest-rate increase in the US."

The ECB's actions on Thursday were approved by a majority of policymakers, but conservative central bank chiefs from Germany, Austria, and Belgium, opposed.

The ECB upgraded its inflation forecasts across the board, with inflation expected to hit 3.2% next year, significantly over target, before falling to 1.8% in 2023 and 2024. Several policymakers questioned the bank's projections, claiming that it underestimates the risk of inflation remaining above the 2% objective.

"Normally, if we say we don't need any further bond purchases since our inflation projection for 2023 and 2024 is close to or above 2%, it would be a strong signal that the interest rate will be raised in the next or next two quarters," Holzmann said.