The European Central Bank raised interest rates by a quarter percentage point to a three-year high of 2.75 percent on Thursday, a widely expected move that marks the third rise in euro zone rates since December 2005.
Inflation accelerating further above the ECB's target, economic growth near its long-term trend and signs of a pick-up in consumer spending all contributed to market expectations of tighter policy.
Fifty of 52 analysts polled by Reuters earlier this week expected the ECB to raise rates to 2.75 percent from 2.50 percent, where they had been since the bank's March meeting. Falling equity markets and a strengthening euro meant the ECB was unlikely to go for a chunky half percentage-point rise, but rates are nonetheless now at their highest level since early March, 2003. The focus is now on ECB President Jean-Claude Trichet, who will host a news conference explaining the rate decision at 1230 GMT in Madrid, where the Governing Council held one of its twice-yearly policy meetings away from the ECB's Frankfurt home.
ECB watchers are looking for any hint that the ECB might step up its so-far quarterly pace of rate increases, and for revised 2006/07 growth and inflation forecasts.