UPDATE 2-European shares at fresh one-year peak after dovish ECB signal

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* Euro zone stock index .STOXXE trades at 2007 highs

* ECB signals faster money-printing to keep lid on yields

* Bank stocks tumble after ECB announcement

(Adds comment, updates prices throughout)

By Shreyashi Sanyal

March 11 (Reuters) - European stocks hit their highest level in a year on Thursday as worries about a spike in inflation eased and the European Central Bank said it was ready to accelerate money-printing to keep a lid on euro zone borrowing costs.

The pan-European STOXX 600 index .STOXX rose for a fourth straight session, adding 0.5% to the previous day's gains sparked by tame inflation data and the U.S. Congress approving one of the largest economic stimulus measures in history. .N

A narrower index of euro zone blue chip stocks .STOXXE gained 0.7% to trade at its highest level in more than 13 years.

The ECB said it would use its 1.85 trillion Pandemic Emergency Purchase Programme (PEPP) more generously over the coming months to stop any unwarranted rise in debt financing costs. ECB President Christine Lagarde also warned against premature policy tightening. market was concerned about rising yields which could lead to quickly shrinking equity risk premia in the euro zone," said Florian Regnery, cross asset strategist at Commerzbank (DE: CBKG ), noting the favourable reaction to the ECB's commitment to contain rising bond yields.

"It is a strong signal...we were not expecting them to be so dovish. We thought they would merely stress the flexibility of (the PEPP) but would not follow it up with concrete action just yet."

The technology .SX8P , mining .SXPP and travel & leisure .SXTP sectors were the top gainers in Europe, each rising more than 2%. Banks .SX7P fell the most, with UK-based lender HSBC's shares HSBA.L down 4.7%.

European stock markets are on course for strong weekly gains on hopes that massive stimulus measures and vaccination programmes will spur a recovery in the global economy, while calmer bond markets boosted appetite for riskier assets like equities.

France's state-controlled power group EDF EDF.PA jumped 10.9% after Finance Minister Bruno Le Maire told local TV that there will be no break-up of the company as negotiations between Paris and Brussels over an overhaul of the company enter a final stage, sources told Reuters. RR.L edged up 0.7% as the British engine-maker stuck to its forecast to burn through less cash this year after posting a worse-than-expected 2020 loss. fashion house Hugo Boss AG BOSSn.DE was down 3.6% after saying it expects coronavirus restrictions to keep weighing on its business in the first quarter, and German chemicals maker Lanxess LXSG.DE fell 4.8% after a disappointing 2021 earnings outlook.