The European Central Bank is not set on raising rates in September, and its recent reference to its August 2nd policy statement was intended to keep options open, national central bank officials said yesterday.

Instead, the ECB is focusing on current financial market turbulence, which will be the decisive factor in determining whether it raises rates by a quarter of one percentage point to a six-year high of 4.25 per cent.

"If there is a normalisation in the markets, a rate hike is still possible. If not the ECB will wait with the next step," said a senior official at a euro-zone national central bank.

These latest comments came as French president Nicolas Sarkozy urged the central bank to take account of global financial market turmoil and economic growth when setting interest rates.

Closer to home the feeling was similar, with one of Ireland's top economists saying the recent stock market turmoil has transformed the international interest rate outlook.

"Interest rates in the US now look set to fall by mid-September at the latest and the previously expected rate increases in the Euro zone and the UK now look unlikely," said Dan McLaughlin, group chief economist at Bank of Ireland. "On that basis, we are now more comfortable with the view that we are indeed at the top of the interest-rate cycle."

Many economists interpreted this as a signal that the ECB still intended to raise interest rates next month. That interpretation is wrong, the national central bank official said.