The European Central Bank chose to leave interest rates unchanged Thursday, but hinted that the bank's 17-member Governing Council is moving toward a tightening bias.

After explaining at a press conference why the ECB left the equivalent of the fed funds target at 2.5%, ECB President

Wim Duisenberg

said that because of improving prospects for eurozone growth and possible increasing inflationary pressures, a tightening "bias is gradually creeping into our discussions."

Since this was the last press conference until the ECB returns from its summer holiday in September, the coy hint toward higher rates will give market participants something to stew about as they broil themselves on the Mediterranean's beaches in August. While it remains unlikely the ECB will change interest rates this year, the wily Dutchman's comments may give the euro some badly needed support as it waivers just above parity with the U.S. dollar.

All Duisenberg would say directly about the foreign exchange markets was that the ECB continues to believe that the euro has the potential to achieve a stronger external value and that the central bankers will continue to safeguard the currency's internal purchasing power. The euro has lost around 15% of its value against the dollar since the beginning of the year.

Duisenberg's creeping upward bias follows up on the slight shift in tone in the ECB's July monthly report, which was released Tuesday. While the report communicated the central bank's contentment with current monetary conditions, it emphasized the need to watch out for inflationary pressures in the coming months.

Indeed, while Duisenberg said the eurozone's economic recovery remains modest, he chose to point out that, over the midterm, risks to the eurozone's price stability lay to the upside. "The expectation of a strengthening in economic activity in the course of 1999 and a further acceleration next year all indicate that any upward pressures on prices will have to be monitored very carefully," Duisenberg said.

The ECB's next press conference will be held Sept. 9. Whether the creeping tightening bias talk helps the euro come back from the summer holiday as refreshed as the central bankers remains to be seen.

The ECB sets monetary policy for Germany, France, Italy, Spain, Portugal, the Netherlands, Belgium, Finland, Luxembourg, Ireland and Austria.