ECB hikes rates to highest level in nearly 7 years

By Marc Jones

FRANKFURT (Reuters) - The European Central Bank raised interest rates to their highest level in nearly seven years on Thursday, but dimmed the prospect of further moves, as euro zone growth looks set to falter despite soaring inflation.

After the ECB raised rates to 4.25 percent from 4 percent in a widely expected move, Trichet said this was needed to help get record euro zone inflation back under control.

"The monetary policy after today's decision will contribute to achieving our objective of price stability," he told a news conference, describing the decision has unanimous unlike last month's three-way split.

But Trichet evinced no desire on the part of the Governing Council to change monetary policy again soon.

"Starting from here I have no bias. You know of course our constant position which is part of our monetary policy -- we have no pre-commitment on the medium term."

The euro weakened against the U.S. dollar <EUR=> after Trichet's comments dampened markets' earlier expectations of another rate rise this year, and fewer economists forecast rates would hit 4.5 percent in a Reuters poll after Trichet spoke.

Nonetheless, trade unions strongly criticised even the one rate rise.

"The ECB's decision is dangerous, counterproductive and not necessary. It's the European economy and European workers that risk paying the price for this," the European Trade Union Confederation said in a statement.