A future increase in key interest rates is possible, but first the bank needs to gather more information, ECB president Jean-Claude Trichet said at a press conference in Frankfurt.

"It will not take much to make the ECB tighten again," wrote Dansker Bank economists Niels-Henrik Bjorn and Allan von Mehren in a note to clients, the German DPA news agency reported. "If calm returns to the markets and economic data over a couple of months confirm the ECB's main scenario, we believe that the ECB will tighten policy again."

The subprime mortgage crisis in the United States has made banks reluctant to lend, which has increased the cost of credit and caused turmoil in world financial markets over the past month.

Growth expected in European markets

The ECB will "monitor very closely" all developments in money markets, Trichet said, adding that the bank would act in a "firm and timely manner" to ensure price stability in the 13-country euro zone.

Even with the volatility in the global markets, the outlook for growth in the region remains "favorable," Trichet said.

The bank's decision to scrap a planned September rate hike came after the ECB joined central banks around the world in pumping money into the finance sector to shore up market confidence.

Inflation holds steady

Ahead of the ECB's rates announcement, the bank injected an extra 42.25 billion euros ($57.8 billion) into money markets Thursday as part of a drive to lower the cost of credit. Thursday's move helped to push the euro's overnight deposit rate down to 4.05 percent after it climbed to a six-year high of 4.68 percent Wednesday.

Analysts had expected the ECB's decision to leave rates unchanged at 4.0 percent because of the current market instability. Also helping the ECB's governing council to agree to call off this month's rate hike has been data showing inflation holding at 1.8 percent in August. Inflation has remained within the bank's two per cent for the past 12 months.

In a similar move to the ECB, the Bank of England on Thursday said it was "too soon" to judge the economic fall-out of the ongoing worldwide credit squeeze as it left British interest rates at 5.75 percent.