The European Central Bank said yesterday that it needs more information on the economic impact of credit market turmoil before deciding whether to raise interest rates again.

"It remains necessary to gather additional information and examine new data before drawing further conclusions for monetary policy," the bank said in its monthly report published yesterday.

The ECB "stands ready to counter upside risks to price stability".

The ECB stepped back from plans to raise rates in September after defaults on US subprime mortgages pushed up global credit costs and disturbed financial markets.

The bank left its main lending rate at 4 per cent last week.

ECB president Jean-Claude Trichet said on Tuesday that he sees "some signs" of normalisation in money markets and the ECB is still concerned that inflation will stay above its limit of just less than 2 per cent.

"Inflation is expected to be around 2 per cent on average in 2008," the ECB said in yesterday's bulletin. "By acting in a firm and timely manner, we will ensure that risks to price stability over the medium term do not materialise."

At the same time, the ECB said risks to the outlook for economic growth "are judged to lie on the downside". "In view of the potential impact of increased financial market volatility and the repricing of risk on the real economy," the uncertainties surrounding the "broadly favourable outlook for economic activity have increased," it said.

Risks relate to "the potential for a broader impact from the ongoing reappraisal of risk in financial markets on confidence and financing conditions" and to further oil and commodity price increases.

Due largely to a surge in oil prices, "we expect the inflation rate to remain significantly above 2 per cent in the remaining months of 2007 and in early 2008 before moderating again," the ECB said.- (Bloomberg)