FRANKFURT, Germany —  The European Central Bank and the Bank of England left their key interest rates unchanged on Thursday amid inflation worries, and ECB President Jean-Claude Trichet said his bank's rates could go up by "a small amount" at the next meeting.

Trichet's hawkish message after the bank's meeting in Frankfurt startled foreign currency markets, sending the euro higher by almost 2 cents against the U.S. dollar to $1.5531 in afternoon trading.

Higher rates can tamp down inflation, protecting the value of a currency, and Trichet's words that the bank was in a state of "heightened alertness" on price increases helped quash speculation it would cut rates to stimulate economic growth in the near future.

The ECB left its key rate at 4 percent, while the Bank of England's key rate stayed at 5 percent.

Trichet said different views had been presented by members of the ECB's governing council, and that some saw a case for lifting rates immediately. Trichet would not elaborate on what made these members want to raise rates on Thursday, or what would have to happen in the euro zone economy for rates to be increased at the next meeting.

"We could move rates up a small amount in the next meeting," Trichet said. "I'm not saying it's a certainty."

Trichet wouldn't say how much a "small amount" might be, but said it could be "the magnitude of something along the order of what we've done in past decisions." Most of the bank's rate moves in its 10-year history have been by a quarter percentage point.

Trichet said the ECB's mandate is to maintain price stability in the 15 countries that use the euro _ a bloc with 317 million people that comprises some 15 percent of the global economy. He also said inflation had risen significantly since last fall, mainly as a result of strong increases in energy in food prices.

Trichet expressed determination to prevent rising prices from being locked in through a wage-price spiral, or "second-round effects."

"Against this background, the governing council is monitoring very closely all developments," he said. "It is in a state of heightened alertness. By acting in a firm and timely manner, we will prevent second-round effects and ensure that risks to price stability over the medium term do not materialize."

The ECB has stayed away from rate changes since June 13 of last year, while the Bank of England has cut twice this year, but now appears to be holding off over inflation worries as well. The British central bank did not issue a statement after its decision.

The European Union's statistical agency, Eurostat, has estimated that inflation in the euro zone hit 3.6 percent in March and May _ well above the ECB's stated goal for inflation of below, but close to 2 percent over the medium term.

In Britain, the Bank of England's quarterly inflation report in May warned that consumer price increases could spike as high as 3.7 percent this year.

Economists expect slowing growth to prompt the British central bank to eventually cut rates to rekindle the economy, but the inflation outlook has clouded the timing of that. Some predict the Bank of England will lower rates in August, while others suggest that may be too early.

In moves intended to spur the U.S. economy, the U.S. Federal Reserve has lowered its federal funds rate to 2 percent, from 4.75 percent since last September.

That however has weakened the dollar. Lower interest rates can often weigh on a country's currency as investors transfer funds to higher-yielding assets, like the euro.

Still, Fed Chairman Ben Bernanke made his strongest expression of concern yet over inflation and the dollar's slide, indicating Tuesday and again on Wednesday that the Fed's rate cutting spree is probably over.

"Some indicators of longer-term inflation expectations have risen in recent months, which is a significant concern for the Federal Reserve," Bernanke said during a talk at Harvard University Wednesday. "We will need to monitor that situation closely."

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On the Net:

http://www.ecb.int

http://www.bankofengland.co.uk

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