ECB raises key interest rate by 0.25 percent

The European Central Bank (ECB) raised its key interest rate on Thursday by 25 basis points amid solid economic growth and fears of growing inflation spurred by rising oil prices.

The hike, the Frankfurt-based bank's fourth rate increase since December, has brought the ECB's key interest rate to 3 percent.

It also increased its other two key rates, the deposit rate and the marginal lending rate, by 0.25 of a percentage point to 2.00 percent and 4.00 percent respectively at its monthly policy-setting meeting.

The interest rate had stood at a post-war low of 2 percent before December 2005 for years.

The increase was widely expected, as ECB chief Jean-Claude Trichet signaled at regular press conference last month that the ECB was following the principles of strong vigilance on the inflation front as oil prices teetered near record levels.

Speaking at a press conference on Thursday after the meeting of the bank's 18-member council, Trichet warned further rate raises might be necessary.

If the ECB's assumptions of continuing economic growth are confirmed and the risk of rising oil prices underpins inflation pressures, further withdrawal of monetary support "will be warranted," he said.

He listed recent geopolitical developments, referring to the Mideast conflict and Iran's nuclear crisis, as well as the threat of further oil price hikes, as reminders of uncertainties.

Inflation data released this week showed that annual inflation in the euro zone remained at 2.5 percent in July, exceeding the bank's target of close to 2 percent, for 18 months in a row.

Experts expect that the rates in the 12-nation euro zone could reach 3.25 or even 3.5 percent by the end of the year, as the bank is pushing for higher borrowing costs.

Source: Xinhua