FRANKFURT, Germany – The European Central Bank raised its benchmark interest rate Thursday by a quarter percentage point to 4.25 percent in an effort to rein in escalating inflation in the 15-nation euro zone.

The move comes despite worries in some quarters that it could dampen growth, but ECB President Jean-Claude Trichet said at a news conference that the fundamentals of Europe's economy “are sound” and focused on inflation, which he said could remain high “for a more protracted period than previously thought.”

He did not clearly indicate more rate increases were coming, as he did at last month's meeting.

“The monetary policy stance after today's decision will contribute to achieving our objective of price stability,” he said. “I have no bias and we are never precommitted...and we do what is necessary to deliver price stability in the medium term.”

Howard Archer, the chief UK and European economist for Global Insight in London, took that to mean that the bank had clearly moved itself back into neutral.

“The ECB's statement and Mr. Trichet's comments do little to support the view that this could be the first of a series of interest rate hikes,” he said in an e-mail. “There was no reference to the ECB being in a 'state of heightened alertness' or 'strong vigilance,' thereby suggesting that no further interest rate hikes are currently planned in the near term at the very least.”

Trichet has stressed that his main objective is to keep prices stable, and all but promised an increase this month at last month's meeting. But he had also suggested that repeated interest rate hikes are probably not likely.

Inflation has been troubling central banks around the world as commodity prices including oil and food have spiked in a surge of new global demand. While higher interest rates slow inflation, they can also slow economic growth as money becomes more expensive to borrow; Trichet appears to have targeted inflation as the bigger threat.

At the ECB's June meeting, Trichet said members of the bank's governing council stated a case for raising rates to combat inflation even then.

On Monday, Eurostat, the E.U. statistics agency, said inflation in euro nations hit a record 4 percent in June, double the ECB's inflation target of below or around 2 percent. The Bank for International Settlements – a sort of central bank for central banks – also said this week that world headline inflation has risen significantly to 4.75 percent.

Higher euro zone interest rates tend to send its currency higher against the dollar as investors park money where it earns more interest. Meanwhile, a sinking dollar generally boosts the price of oil, which is denominated in the U.S. currency, as more buyers move in.

But the dollar was higher against the euro and other key currencies after Thursday's widely-anticipated European rate move, and oil prices moved lower after hitting a new high of $145.85 a barrel in electronic trading before the rate move.

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