The European Central Bank (ECB) has indicated that mortgage holders may be spared further interest rate rises before Christmas.

In an unusually relaxed monthly report yesterday the ECB indicated that it is generally sanguine about inflation and as a result rates may not be on the way up in the short term.

The report was generally unfazed about prices pressure emerging from money supply growth, high oil prices and the euro. But there was a note of warning about tax cuts and wage demands across the euro zone which could prompt it to raise rates again in 2001.

The ECB also underlined its support for the euro at around $0.86 yesterday as it again intervened in the foreign exchange markets and bought the currency - again acting on its own.

According to Mr Colin Hunt, chief economist at Goodbody Stockbrokers, the ECB appears relaxed and appears to believe that money supply growth is moderating while the outlook for European growth is solid.

Ahead of the latest Irish inflation figures today, it also pointed out that inflation pressures are subsiding somewhat across Europe. "It needs to be recognised that the current upward pressures can be overcome most smoothly if economic agents see them for what they are, namely once-off or temporary price increases resulting from external factors."

It went on to point out that oil price increases should gradually drop out of the annual inflation rate.

According to Mr Oliver Mangan, economist at AIB, there will not be an interest rate rise until next year.

"The ECB has indicated that it has already responded to the rise in inflation in the euro zone to 2.8 per cent and it has counteracted the rise in import prices through continuing intervention in the foreign exchange markets. Given the acceleration in money supply growth, it is unlikely to raise rates again."

However, he pointed out that this may change next year if tax cuts and wage rises are conceded across Europe. According to the ECB, it is "crucial that any loosening in fiscal policy be avoided . . . similarly continued wage moderation is important in order to contribute both to further decreases in the level of unemployment and to maintaining a favourable outlook for price stability."

Mr Mangan pointed out that significant tax cuts are pledged in Germany, France, Italy and the Netherlands and this is likely to be a concern to the ECB. "It is also likely that workers will seek high wages given rising inflation and as a result we will get another half percentage point rise next year."

The ECB bought euros yesterday for the third time in a week to hold the currency's value. The euro surged as far as $0.8625 on the central bank purchases, from $0.8555 a day earlier, but it later traded back to $0.8560.

The ECB's unilateral purchases in the past week are a reminder it is not a "one-way bet" against the euro, Mr Mangan said. Traders continue to wait for the result of the US presidential election. The dollar may rally whoever wins the election, analysts said. Such a close result could make it difficult for either candidate to pass legislation, which means the US economy is unlikely to change much soon. However, a more significant rally in the US currency could follow a Bush victory.