By Sruthi Shankar and Ankika Biswas

(Reuters) – European stocks pared losses on Thursday after the European Central Bank raised interest rates by 75 basis points, matching market expectations, and signalled the need for more hikes to bring down record-high inflation.

The euro zone stocks index was down 0.5% following the announcement, having shed as much as 1.2% earlier. Markets also got a lift from data that showed U.S. economic growth rebounded more than expected in the third quarter.

The ECB raised its deposit rate by 75 basis points to 1.5%, taking the total increase to 2 percentage points over three meetings.

“This is what we were expecting, 75 basis points. Bottom line is the ECB has joined the program going on in the rest of the world – aggressively hiking rates to fight inflation,” said Steve Sosnick, chief strategist at Interactive Brokers.

The central bank also cut the subsidy to banks through 2.1 trillion euros worth of ultra-cheap three-year loans called Targeted Longer-Term Refinancing Operations or TLTROs, but did not give any hint about plans to start winding down its bond holdings.

The rate-sensitive euro zone banks index slipped 0.3%, but was off its session lows when it fell 1.4%.

“I certainly don’t think the TLTRO move was fully priced in. And that is why we’re seeing the European banks bear the brunt of it,” Sosnick said.

Attention now turns to ECB President Christine Lagarde’s news conference at 1245 GMT.

The pan-European STOXX 600 index dropped 0.3% after closing at a five-week high in previous session on expectations that major central banks will slow the pace of interest-rate hikes.

Credit Suisse fell 13.8% after the embattled lender said it planned to raise 4 billion Swiss francs ($4.05 billion), cut thousands of jobs and shift its focus to its rich clients from investment banking, as it attempts to put years of scandals behind it.

Boosting UK’s FTSE 100, Shell rose 5% after the energy major posted $9.45 billion in profit and announced plans to boost its dividend by year-end, while France’s TotalEnergies gained 2.8% after posting a jump in third-quarter net profit.

The two companies helped lift Europe’s oil & gas sector by 2.8%

However, technology stocks remained under pressure as Franco-Italian chipmaker STMicroelectronics fell 7.6% after it forecast sales growth to slow in the latter part of the year.

Miners also took a hit as Anglo American fell 4.2% after a drop in copper production kept its third-quarter output broadly in line with last year.

($1 = 0.9873 Swiss francs)

(Reporting by Sruthi Shankar, Anisha Sircar and Ankika Biswas in Bengaluru; Editing by Vinay Dwivedi and Arun Koyyur)