Germany's key Ifo business climate index held flat in September, undershooting expectations but doing little to change a picture of accelerating growth on the day before the European Central Bank meets to decide rates.

The Munich-based economics institute, Ifo, yesterday said its headline western German index held unchanged at a 12-month high of 95.4 in September after revising its August index up slightly to 95.4 from 95.3.

Although the figure fell short of forecasts, it did little to weaken the view that the long-awaited recovery in the euro zone's largest economy was coming hard and fast and that the ECB may raise rates before year-end to quell inflation.

The Ifo data followed an upbeat assessment of the German economy in the Bundesbank's monthly report released on Wednesday. The report noted that both orders and output had risen significantly in August.

The stronger data follows a key shift in the ECB's rhetoric earlier in October, when the central bank indicated a clear bias toward tightening rates to head off potential inflation in the face of rising growth.

All eyes are now likely to turn to September M3 money supply for the euro area, likely to come next week. The Ifo index's September business expectations component rose to 103.9 from 103.7 in August, while the assessment of current business conditions slipped slightly to 87.0 from 87.3.

In eastern Germany, where economic developments continue to diverge widely from those in the west, the September business index fell to 103.5 from August's 105.1.

According to a Reuters poll of 38 analysts, four expect the ECB to raise rates on Thursday while 13 expect an increase at the following meeting on November 4th. The majority of those polled expect a rise before the end of the year.