The European Central Bank has slowed the pace of its interest rate hikes, opting for a 25 basis points increase by comparison to its 50 basis points hike in March.
In a statement, the bank said the inflation outlook "continues to be too high for too long", and despite declining headline inflation, underlying price pressures "remain strong".
The move brings the benchmark deposit rate to 3.25% and came with a warning from ECB president Christine Lagarde: "We have more ground to cover and we are not pausing, that is extremely clear."
Richard Carter, head of fixed interest research at Quilter Cheviot, said the bank had "taken its foot of the pedal slightly" but "remains a little behind the curve" when compared to its US counterpart.
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"The Fed indicated that yesterday's hike could be its last for the time being, but this is almost certainly not the case for the ECB," he said.
"This remains a tense period for the ECB, and unless inflation falls swiftly this year the bank could find itself in a very tricky spot as the struggling finance system will no doubt impact economic growth while inflation remains stubbornly high."
Anna Stupnytska, global macro economist at Fidelity International, noted the "dovish tone" of the bank's announcement and added their belief that the policy tightening delivered by the ECB so far is "already sufficient to cause a recession".
"Even without further acute stress in the banking system in Europe, tight credit conditions are here to stay, ultimately leading to credit contraction and recession," she said.
"We continue to stress that the ECB is very likely already in the policy mistake territory that would ultimately require a rapid course correction in coming months."
