FRANKFURT, March 8: The European Central Bank shrugged off political pressure and recent jitters on world financial markets to raise its key interest rates to a five-and-a-half-year high on Thursday.

But the ECB offered no clear clue as to whether borrowing costs in the 13-country eurozone would rise -- or by how much -- in the coming months.

As unanimously predicted, the bank's rate-setting governing council raised its key interest rates by a quarter of a percentage point to 3.75 per cent, bringing eurozone borrowing costs to their highest level since September 2001.

It was the seventh quarter-point rise in eurozone interest rates in 15 months and was promptly matched by a similar move by the Danish central bank to 4.0 per cent.

By contrast, the Bank of England held its key rates steady at 5.25 per cent for the second month in a row after British annual inflation slowed sharply in February.

In the regular monthly news conference following the ECB's meeting, the euro bank's president Jean-Claude Trichet explicitly left the door open to further moves.

"After today's increase, given the favourable economic environment, our monetary policy continues to be on the accommodative side, with the key ECB interest rates moderate, money and credit growth vigorous and liquidity in the euro area ample by all plausible measures," he said.

In fact, the ECB upgraded its eurozone growth forecasts for this year and next year and also raised its projection for inflation next year. "Therefore, looking ahead, acting in a firm and timely manner to ensure price stability in the medium term is warranted," Trichet said.

Nevertheless, in a significant change in wording, Trichet described the current level of interest rates as "moderate" rather than "low," the term he has used previously. And ECB watchers saw that as a possible hint that an end to the current tightening cycle could soon be in sight.

"I said interest rates are moderate, last time I said they were low," Trichet said.

Pressed on the matter at the news conference, the Frenchman refused to elaborate on the implications of his change in wording for future rate moves.

On the one hand, he insisted that it was not his intention to suggest that interest rates had now reached their peak.

"As regards whether or not we are at a peak, I didn't say we were at a peak, full stop," Trichet said.

On the other, the Frenchman said he was not looking to prepare markets for more restrictive monetary conditions.

"If I was preparing the market for us being restrictive, I would have said that. I didn't say that," he said.

The ECB chief said future rate moves would depend on the bank's assessment of risks to price stability.

The bank was constantly on the alert and "ready to take whatever steps are necessary to counter inflation risks," he said.

The ECB appeared unfazed by the recent sharp fall in worldwide stock prices.

In fact, Trichet argued that the development was "probably welcome" since it represent a "re-appreciation of risks" by the markets that central banks had long been calling for.

ECB watchers were convinced that additional rate hikes were still on the cards, even if the tightening cycle might soon to be coming to an end. —AFP