Expectations of a rise in interest rates this week were further strengthened last night when the President of the European Central Bank (ECB), Mr Wim Duisenberg, confirmed that the Bank's Governing Council was moving towards raising rates.

"Our inclination towards higher interest rates has certainly increased somewhat since July. I don't know what the ECB Governing Council will decide on November 4th, but I can imagine," he said in an interview to be published today in the German business daily Handelsblatt.

Mr Duisenberg said that the central bankers agreed at the beginning of October that the next move on interest rates would be upwards but they were not certain if the move would take place this year or at the beginning of next year.

"We simply needed more evidence for our assessment that price stability is endangered in the medium term. The most recent developments in money supply undoubtedly confirm the trend, even if we don't base our judgment on that," he said.

Expectations of an interest rate rise were boosted last week by figures showing a sharp increase in M3 money supply to 6.1 per cent in September from 5.7 per cent in the previous month.

The rise, which was greater than most analysts expected, indicates an annual M3 growth rate of 5.9 per cent - well above the ECB target of 4.5 per cent.

Market analysts are almost unanimous in their expectation of a rate rise but they disagree on whether the ECB will raise rates by 0.25 per cent or 0.50 per cent.

Mr Martin Huefner, of the Hypo-Vereinsbank, believes that the ECB has put itself under unnecessary pressure to make a substantial cut.

"They have massively encouraged expectations and not left enough doubt in the market," he said.

The Bundesbank president, Mr Ernst Welteke, is understood to oppose any rise in rates, which he fears could stall Germany's fragile recovery, but other central bankers, including the Republic's Mr Maurice O'Connell, are likely to press for an immediate rise of 0.50 per cent.

In his interview today, Mr Duisenberg clearly outlines how the ECB makes a point of preparing the markets before each move on interest rates and leaves little doubt that current expectations are in line with the bank's plans.

"When we make a decision about interest rates, we influence the markets accordingly, all the more so the closer the decision comes," he said.