Policymakers at the European Central Bank have decided to raise its key interest rate by 0.25 percentage points to stem rising inflation. But the pace of increase is slower than its recent hikes.

The decision came during a Governing Council meeting at the bank's headquarters in Frankfurt, Germany, on Thursday.

The rate on the main refinancing operations will climb to 3.75 percent, effective from May 10.

Eurozone inflation remains well above the bank's medium-term target of 2 percent, growing 7.0 percent in April compared to the same month last year.

The ECB issued a statement after the policy-decision meeting in which it says, "Headline inflation has declined over recent months, but underlying price pressures remain strong."

But the extent of rate increase is smaller this time than the bank's third consecutive 0.5-point hike through March.

Analysts say this indicates the policymakers took note of possible implications of their rate hikes. The eurozone economy eked out GDP growth of only 0.1 percent in the first quarter of 2023.

Concerns have also been smoldering in financial markets following three bank failures in the United States in less than two months.