The European Central Bank has left its key interest rate unchanged, but has signalled that it will increase rates next month.
The rate remains unchanged at 1.25% this month. The ECB last raised its key rate a quarter point in April.
Speaking to reporters in Frankfurt, ECB President Jean-Claude Trichet said 'strong vigilance' was needed in relation to inflation.
This is the sort of language usually used by the ECB chief to signal a rates rise the following month.
Questioned by reporters after his opening statement, the ECB chief said the bank was 'in a mode where we might increase interest rates next month'.
But he said the ECB was not signalling 'any particular pace' on future interest rate moves.
Markets had expected the bank to follow up April's first interest rate increase in nearly three years with another quarter-point rise in July.
Most economists think there will be at least two more rises this year as the bank tries to bring inflation back towards target.
Inflation in the eurozone is currently running at 2.7% - above the bank's goal of just under 2%.
Mr Trichet also said this afternoon that ECB forecasters had raised their forecast for eurozone inflation this year to 2.6% from 2.3%, though they also hiked their growth forecast from 1.7% to 1.9%.
Over the past few months, Mr Trichet has spelled out the bank's determination to prevent higher oil and food prices from being embedded in the eurozone economy through higher wage settlements.
