The European Central Bank (ECB) raised its key interest rate by a quarter of a percentage point to 2.25 percent on Thursday, which was its first rate increase since 2000.

The move was widely expected earlier as ECB President Jean-Claude Trichet said last month that the bank was prepared to "moderately augment" rates to head off inflation in the euro zone.

The European Central Bank (ECB) raised the rate for the first time since 2000 amid a split in opinion among economists and ministers from the euro-zone economies.

The Frankfurt-based bank has not changed the rates since January 2003 for the 12-member euro-zone. Its last rate hike happened in October 2000 when the official rates were lifted by 25 basis points to 4.75 percent before starting to scale them back from May 2001 as growth began to slow in the zone.

ECB President Jean-Claude Trichet warned recently that the bank was prepared to "moderately augment" rates to head off inflation, as the bank's 18-head governing council saw the necessity to raise rates because they expected economic growth to accelerate as inflation risks increased.

The ECB projected inflation above its 2 percent limit in 2006 and 2007, reports here quoted informed sources as saying, due to expanding liquidity and high oil prices.

The rates-increasing move has drawn criticism from economists and ministers.

Some say that in half a year an increase could start to look premature, considering the fragility of the economy.

Jean-Claude Juncker, who chairs the euro-zone group of finance ministers, said this week that the ECB should pay more heed to an economy that was still "fragile."

French Finance Minister Thierry Breton said an increase was unjustified as inflation "doesn't exist." He told the French Senate last Thursday that "I don't see any risk of a revival of inflation, either in France, or in the euro-zone."

The central bank projects growth of 1.9 percent in the euro-zone in 2006 and 2 percent in 2007, after 1.4 percent this year, the informed source said.

The US-based financial news service Bloomberg cited Merrill Lynch & Co.'s chief European economist Ian Stewart as saying that the ECB will lift its benchmark rate to 3.5 percent next year from the current level.

Source: Xinhua