Eurozone banks are set to pay back on Friday just under 300 billion euros ($311 billion) in cheap loans paid out by the European Central Bank, the institution said, as it looks to ease sky-high inflation.

The ECB had previously offered the cheap cash to banks in a bid to encourage them to lend to consumers and businesses, and thereby fight stubbornly low inflation at the time.

But with inflation shooting past 10 percent and well beyond its target of two percent, the ECB has now reversed its loose monetary policy and is instead incentivising banks to return their cash piles.

The move to withdraw these cheap so-called TLTRO loans would bring the ECB's policy in line with its rate hikes that began in July.

Policymakers have already raised interest rates by 200 basis points from previously historic lows and signalled there will be more to come.

"We expect to raise rates further," ECB President Christine Lagarde said at a banking forum in Frankfurt on Friday, adding that just ending its accommodative monetary policy "may not be enough" to tame price rises.

While rate hikes remained the ECB's "most effective tool", Lagarde said, the ECB has been looking at other ways to take inflation off the boil.

At its last meeting in October, the ECB changed the terms of super cheap loans paid to banks which have bloated its multi-billion-euro balance sheet.

Policymakers "recalibrated" the conditions on the most recent tranche of so-called TLTROs issued during the coronavirus pandemic to boost lending to households and businesses, in order to incentivise early repayment.

Recent hikes had created an opportunity for banks to turn a quick profit by parking their money at the ECB, exploiting the widening difference in interest rates.

The measure was no longer "compatible" with the ECB's aim to tighten its policy and bring down inflation, analysts at the ING bank said.

Of the 2.1 trillion euros in loans outstanding, around 296 billion were repaid by banks following the rule chance.

The returns were "below expectations", said Frederik Ducrozet, head of macroeconomic research at Pictet.

The first returns however mark a change of direction for banks. The last repayment in September totalled just 6.5 billion euros.