European Central Bank (ECB) has signalled that it will raise interest rates next month, from 1.25%.

Earlier on Thursday, the ECB kept rates unchanged for the second month in a row, after increasing them in April for the first time in almost two years.

The central bank wants to raise rates again in July to curb inflation in some of the eurozone's 17 member states.

But it has to balance that against the need to leave rates low to boost growth in nations such as Greece and Portugal.

In his press conference, ECB president Jean-Claude Trichet pledged to exert "strong vigilance" on inflation, a signal to the markets that rates will be raised at the next meeting.

"I would say... that it means that we are in a mode where there might be in the next meeting an increase of rates," he said. "But we are never pre-committed," he added.


A July move may prove to be the last”


UK interest rates remain at 0.5%
However, Mr Trichet added that since the ECB's May meeting there has been "continued upward pressure on overall inflation mainly owing to commodity and energy prices".

Inflation in the eurozone was 2.7% in May. The ECB increased its forecast on inflation for 2011 to 2.6% from its previous prediction of 2.3%.

The bank also increased its economic growth forecast for 2011 to 1.9% from 1.7%.

Posted in: central bank wants to raise rates again in July to curb inflation in some of the eurozone's 17 member states.