The European Central Bank raised its key monetary policy rate by a quarter point on Thursday, as widely expected, to fight rising inflation on the back of oil and food price rises.
Reaction in the markets was muted, but analysts said it is unlikely that the bank will stop at only one hike.
They (the markets) are going to go and price in even more rate hikes than are currently in the curve," Lena Komileva, chief economist at Tullett Prebon, told "Power Lunch Europe."
Policymakers across the 15-member euro zone tried to persuade ECB President Jean-Claude Trichet to refrain from hiking the rate, saying signs of weakness were multiplying and the central bank should also be the guardian of economic growth.
On Wednesday, three French Members of Parliament sent a letter to Trichet urging him to refrain from hiking the rate, while an online petition to stop the rate hike gathered over 10,000 signatures in one month.
French president Nicolas Sarkozy spoke against the rate hike, and this time German Finance Minister Peer Steinbrueck, who last year was stating publicly that he loved a strong euro, joined in, saying the ECB should consider the impact of its rate decisions on the zone's economies.
Conditions have deteriorated markedly in the area since last year, with even the strongest economy, Germany, showing signs of fatigue.
Confidence indicators released last week suggested the euro zone's economy was close to stagnation last month and is heading for further slowdown, while the manufacturing sector contracted in June for the first time in three years and there are signs unemployment might pick up.
Oil prices surged to a new record high above $145 on Thursday, with a weak dollar and supply worries weighing on the market, but U.S. Treasury Secretary Henry Paulson said the softer greenback can't be blamed for the spike in crude prices.
All eyes are now on Trichet's news conference as investors will look for clues on whether more monetary tightening is in the cards.
"With the economic slowdown becoming more severe and inflation at a record high 4 percent, the ECB is still stuck in a balancing act, even after today's hike," ING Bank analyst Carsten Brzeski wrote in a market note.
The market was likely to interpret any reference to further inflation dangers as a hint at another rate rise, analysts said.