The latest money supply figures for the euro zone are fuelling the debate between those economists who think the European Central Bank will raise interest rates before the end of this year and those who think it will wait until some time in 2000.

According to the ECB, broad money supply grew at an annual rate of 5.6 per cent in July and at 5.3 per cent in June. Since the ECB had previously estimated the June figure at 5 per cent, this supply is expanding faster than the central bank had thought. It grew at 5.4 per cent from May to July compared with the ECB's preferred rate of 4.5 per cent.

It is open to question whether faster monetary growth will automatically translate into higher inflation in the euro zone. But the ECB's official policy is to treat money supply as an important indicator of future inflationary trends. Hence a failure to tighten monetary policy in response to the data may leave financial markets confused about the ECB's thinking.

And with the euro-zone economy now clearly improving, there may be no need for rates to stay at what are historically very low levels.