The European Central Bank raised interest rates as promised by 50 basis points

 FRANKFURT, March 16 (Reuters) - The European Central Bank raised interest rates as promised by 50 basis points on Thursday, sticking with its fight against inflation and facing down calls by some investors to hold back on policy tightening until turmoil in the banking sector eases.

A rout in global markets triggered by last week's collapse of Silicon Valley Bank (SVB) and made worse by doubts around the future of Switzerland's Credit Suisse had prompted some to question whether the ECB would pause its rate-hiking cycle.

Yet in line with its often-repeated guidance, the central bank for the 20 countries that share the euro lifted its deposit rate to 3% - the highest level since late 2008 - as inflation is seen overshooting its 2% target through 2025.

Lagarde said the ECB decision was adopted by "a very large majority" of its policy-makers.

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Bank shares had been in freefall this week, spooked first by SVB's collapse, then a plunge in the value of Credit Suisse, a lender that has long been dogged by problems.

But the Swiss National Bank threw Credit Suisse a $54 billion lifeline overnight, a big enough show of force to send its shares back up around 20% and lift other bank stocks.

Three sources close to the Governing Council told Reuters it was the SNB's move that had given ECB policymakers confidence to press ahead with the 50 basis point rate increase.

The key worry for the ECB is that monetary policy works via the banking system, and a full blown financial crisis would make its policy ineffective.

That left the ECB in a dilemma, pitting its inflation-fighting mandate against the need to maintain financial stability in the face of overwhelmingly imported turmoil.

ECB Vice-President Luis de Guindos said euro zone exposure to Credit Suisse was "quite limited" and Lagarde noted that in any case, the policy tools the ECB had at its disposal meant there was no trade-off between financial and price stability.

Inflation, the bank's primary responsibility, is far higher than in previous crises and the ECB's new projections, published on Thursday, put price growth above its 2% target through 2025, an overriding concern for many of its policymakers.

Inflation is seen averaging 5.3% this year, 2.9% in 2024 and 2.1% in 2025, the ECB said, adding that these projections were finalised before the current turmoil.

Lagarde noted the bank was starting to see signs that its policy tightening was having an impact on the economy, notably through credit channels.

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