Strong French industrial output released yesterday and an expected upturn in eurozone money supply growth were seen as heightening the chances of an interest rate rise by the European Central Bank (ECB) on November 4th.

French national statistics institute INSEE said industrial production rose 1.5 per cent in the cumulative July-August period from June, beating analysts' expectations and underscoring the view that the euro zone's economy is on a stable upward trend.

September euro area money supply, put into the limelight recently after the central bank stressed its importance for monetary policy, is unlikely to reveal a slowdown in credit growth to the private sector, economists said yesterday.

M3 annual growth, expected to be released next week, is forecast to have accelerated to 5.8 per cent in September from August's 5.7 per cent.

Separately, German price data also released yesterday confirmed the ECB's prediction that inflation is gradually edging up, even though it remains benign.

The data, released by four German states, prompted analysts to predict that pan-German inflation due to be released on Monday would show a rise to 0.8 per cent in October from September's annual rise of 0.7 per cent.

Economists said the indicators may deliver the ECB the economic data and the monetary policy reasoning it lacked at previous meetings to pull the trigger on interest rates. The ECB's council is scheduled to meet next on November 4th.

The head of the Bank of France Mr Jean-Claude Trichet added his weight to the fresh data, saying the French economy was growing to an extent that there were signs of some capacity and labour market tightening.

The ECB clearly attaches heightened importance to M3 money supply, analysts said, after ECB President Wim Duisenberg said recently the central bank's monetary stance was "rather accommodative" but it needed more evidence before taking action.

The bank said in its latest monthly report that M3 growth above its reference value of 4.5 per cent was not simply due to data distortions caused by the switch to the euro currency.

Mr John Biggs, chief economist at AIB in Dublin, said: "A high M3 figure for September could give the ECB the reason to tighten monetary policy at its next meeting on November 4th, even though the indicator is still very volatile."