The European Central Bank raised its key interest rate by 25 basis points to 1.25 percent on Thursday, tightening policy as expected to counter firming price pressures in the 17-country euro zone.

Euro zone inflation hit 2.6 percent last month, above the ECB's medium-term target of just below 2.0 percent, and the bank has been keen to re-establish its inflation-fighting credentials with its first rate rise since July 2008.

All but four of 80 economists polled by Reuters had expected the ECB to raise rates by 25 basis points to 1.25 percent.

The ECB also raised its deposit rate by 25 basis points to 0.50 percent, and increased its marginal lending rate by the same amount to 2.0 percent.

ECB President Jean-Claude Trichet will talk about the reasoning behind the bank's decision at a news conference starting at 1230 GMT. (Reporting by Paul Carrel)