ECB raises interest rates 25 bps to 4.25 pct

FRANKFURT (Reuters) - The European Central Bank raised its key interest rate to 4.25 percent on Thursday, making its first increase in more than a year due to soaring inflation.

The decision had been widely expected since ECB President Jean-Claude Trichet raised the possibility last month and euro zone inflation hit a record 4 percent year-on-year in June.

The ECB last raised rates in June 2007, and had signalled further tightening until financial market turmoil forced it to halt a run of eight increases that took them from two percent to four percent in just over a year and a half.

All but four of the 81 analysts polled by Reuters last week had expected the ECB to increase rates following a month of broad hints from top policymakers and grim news on inflation.

The ECB also increased its marginal lending rate, at which banks can get emergency overnight loans, to 5.25 percent and its deposit rate to 3.25 percent.

Trichet will present the ECB's latest economic assessment at a news conference at 1:30 p.m. British time at its Frankfurt headquarters.

(Reporting by Marc Jones; editing by David Stamp)