Many expect the ECB to raise rates to 4% by the end of the year.

The quarter point rise was widely expected by analysts and takes the eurozone rate to its highest level in five-and-a-half years.

The Frankfurt-based ECB has repeatedly warned of the risk of growing inflation across the 13-member eurozone.

Last month ECB president Jean-Claude Trichet warned "strong vigilance" was needed in the battle against inflation

'Confidence growing'

With Europe's leading economies performing strongly, some analysts believe rates could hit 4% before the end of the year.

Figures published last week actually showed a downward revision in January's eurozone inflation from 1.9% to 1.8% - below the ECB's 2% target.

Nevertheless, with unemployment levels falling in Germany and France and business confidence on an upward curve across the eurozone, experts believe policymakers do not want to take any chances with price stability.

"The ECB is clearly retaining a tightening bias in its monetary policy stance following the rate hike," said Global Insight's chief UK and European economist Howard Archer.

"Today's developments have reinforced our belief that interest rates will rise to 4.00% around mid-year."

The ECB's rate decision was announced shortly after the Bank of England said it was keeping UK interest rates on hold at 5.25%.