The European Central Bank has increased interest rates in the Euro zone from 4% to 4.25% in a bid to tackle rising inflation.

Inflation in the Euro zone economy has now hit 4%, taking it to the highest level since records began in 1996.

The Bank hinted that further rises would be necessary to bring this back down, although the message was not as aggressive as many analysts had expected.

"The monetary policy stance will contribute to achieving our objective of price stability," ECB president Jean-Claude Trichet said. "I have no bias and we are never pre-committed."