But he said ECB policy makers want to see more economic data before taking any action. "We are assessing if we have been accommodative for long enough, but we need more evidence to make our conclusions very firm," he said. The ECB's hawkish remarks come in a week in which central banks in the US and the United Kingdom also left interest rates unchanged but made clear that increases may be needed. "In all of the rate decisions we've had this week, the overriding theme has been: `We're not doing it now. We're waiting for more data,' " said Neil Parker, Treasury economist at Royal Bank of Scotland in London.

The euro initially fell slightly on the ECB's announcement around midday that it would hold its key refinancing rate steady at 2.5 per cent. But it rebounded as Duisenberg reinforced expectations that a rate rise is in the works. Late in the European day, the euro was trading at $1.0715, up from an intraday low of $1.0657.

Duisenberg said the ECB is confident the euro-area economy will continue to accelerate throughout next year. But the ECB is wary about possible inflationary pressures. "The governing council conducted an intensive discussion of the current monetary-policy stance, in which it was concluded that the balance of risks to price stability remains on an upward trend," he said. The ECB's main mandate is to keep prices stable, which it defines as a year-to-year rise of less than 2 per cent. Duisenberg said "sustained" M3 money-supply growth and expansion in credit to the private sector signal "a rather generous liquidity situation in the euro area."

The ECB is also trying to gauge whether euro-zone consumer-price inflation is likely to accelerate more than can be accounted for by a rise in commodity prices. "We need more data on monetary developments," Duisenberg said, noting that September money-supply numbers will be out at the end of this month.

Economists' forecasts are mixed on the timing of the rate rise. Hans-Juergen Meltzer, economist at Deutsche Bank Research in Frankfurt, now expects the ECB to either raise rates in November or delay the move until early next year. "By the next meeting two weeks from now, they won't have much more information than they have today," he said. On the other hand, the ECB would likely be reluctant to move rates in December, given the uncertain economic effects of preparations for the year-2000 changeover.

Duisenberg gave an optimistic prognosis for both the world economy and the euro zone. "The growth of the US economy continues to be strong, and in Japan, economic indicators are now more clearly pointing toward an improvement in economic activity."

Looking at the euro zone, he said he expected that weak second-quarter growth doesn't darken an outlook for a further upturn. Both industrial-production data and consumer demand show strength. "The outlook for a continuing improvement in overall activity therefore remains favorable," he said. German industrial output rose a healthy 1.1 per cent in August from July, the German Finance Ministry reported Tuesday. That followed Monday's news that August manufacturing orders in Germany soared 5.1 per cent from a month earlier.

Asked about the tenor of Thursday's deliberations in the policy-making council, which is made up of six Frankfurt-based executive board members and the euro zone's 11 national central-bank governors, Duisenberg said, "The discussion was very intensive but not at all controversial." Anaysts have suggested recently that some national central-bank presidents may be less inclined toward raising rates than members of the directorate.

That perception was spurred by last week's remarks by the ECB's vice president, Christian Noyer, which appeared to ratchet up the ECB's rhetoric: "It's entirely possible, I would indeed say probable, that we will have to do something in order not to compromise our medium-term goal of achieving price stability, to take some kind of action," he told a committee of the European Parliament.

-- The Wall Street Journal