FRANKFURT, Germany (AP) — The European Central Bank (ECB) carried through with a large interest rate increase Thursday, brushing aside predictions it might dial back as US bank collapses and troubles at Credit Suisse feed fears about the impact of higher rates on the global banking system.

The ECB hiked rates by half a percentage point, underlining its determination to fight high inflation of 8.5 per cent.

While some foresaw a smaller increase because of the banking turmoil, President Christine Lagarde repeatedly called the banking sector in the 20 countries using the euro currency “resilient”, with strong financial reserves and plenty of ready cash.

And if it became necessary, she said, the ECB is “fully equipped” to provide additional support to the banking system.

“We are monitoring current market tensions closely and stand ready to respond as necessary to preserve price stability and financial stability,” Lagarde said.

ECB Vice-President Luis de Guindos said the eurozone’s exposure to Credit Suisse, which is outside the European Union’s banking supervision structure, was “quite limited” and “not concentrated” in any one place.

Their message follows Silicon Valley Bank in the US going under last week after suffering losses on government-backed bonds that fell in value due to rising interest rates. Then, globally connected Swiss bank Credit Suisse saw its shares plunge this week and had to turn to the Swiss central bank for emergency credit.

The troubles at Credit Suisse dragged down the shares of stalwart European lenders such as Deutsche Bank, BNP Paribas and Societe General on Wednesday. Bank shares recovered Thursday.

Analysts say the share sell-off was fed by investor fear that banks took added risks to increase investment returns during years of very low interest rates and some may have failed to safeguard themselves against those holdings turning sour as rates rose.

As for more rate hikes in Europe, Lagarde said “inflation is projected to remain too high for too long” and that further increases will be based on what the numbers show. She did not commit either way, unlike her stance before Thursday’s meeting when she said a rate increase was “very likely”.

“Markets are assuming that this may be the ECB’s last rate hike, but the reality is that developments in the banking sector could shift either way in coming weeks,” said Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management. “If the panic eases, the ECB is likely to resume tightening before long” with more increases.

Similar questions are being raised about what the US Federal Reserve will do at its meeting next week.

Fed Chair Jerome Powell said only last week that the ultimate level for rates would be “higher than previously anticipated,” leading some analysts to predict the Fed would raise by a half-point after slowing the pace to a quarter-point in February. Since then, expectations shifted back toward a quarter-point.

European finance ministers have said their banking system has no direct exposure to the failures of Silicon Valley Bank and others in the US.

The ECB has been raising rates at an unprecedented pace to contain inflation fuelled by higher energy prices tied to Russia’s war in Ukraine. Its benchmarks affect the cost of credit across the economy, making it more expensive to buy things or invest in new production. That cools demand for goods and eases upward pressure on prices.

The ECB’s rate for lending to banks was raised to 3.5 per cent, and the rate it pays on deposits it takes from banks was lifted to 3 per cent.