The European Central Bank today raised interest rates by 25 basis points, and upped its growth forecasts for the region.

The ECB announced that the minimum bid rate on the main refinancing operations of the Eurosystem will be increased by 25 basis points to 2.5%. The interest rate on the marginal lending facility will be increased by 25 basis points to 3.5%, and the interest rate on the deposit facility will be increased by 25 basis points to 1.50%.

The move was expected by analysts. “This was the second ECB rate hike in the current cycle and very well signaled by ECB officials in the past few weeks,” commented CIBC World Markets. It adds that it appears, “the tightening psychology remains in place at the ECB, but the monetary authorities do not want to ‘pre-commit’ to future rate hikes.”

CIBC suggests that this bodes well for its call that another rate rise is unlikely as early as next month, but that investors should expect another policy action before the end of the second quarter. “As we suspected, the ECB updated staff projections show upward revisions to both its growth and inflation forecasts. GDP growth is now expected at 2.1% this year (vs 1.9% in Dec) while inflation is now seen averaging 2.2% in 2006 (vs 2.1% in Dec),” it notes.

“On inflation, the ECB President identified continued upward risks (including past high oil price increases passing through and indirect taxes),” CIBC added. “Today’s press conference confirms that the ECB is not done yet on the rate hike front and the next move is more a question of months (even if not next month) than quarters.”

In a separate announcement, the ECB also reported that at today’s meeting, the Governing Council agreed to the appointment of a new member of the Executive Board of the ECB, Jürgen Stark, who is currently a vice president at Germany’s Bundesbank.