The European Central Bank has shocked financial markets by signalling that interest rates will almost certainly rise in April, taking a markedly more aggressive stance on inflation than the Bank of England and US Federal Reserve.

Sending the euro sharply higher, Jean-Claude Trichet, ECB president, on Thursday warned that the euro's monetaryguardian was exercising "strong vigilance" - code for a rate increase just a month away. A hike next month from the record low of 1 per cent, was "not certain, it is possible" he said. Inflation risks were on the "upside", especially if oil and commodity prices rose further, while monetarypolicy was "very accommodative", the ECB president said.

Economists warned that the ECB's action risked backfiring, pointing out that its last interest rate increase in July 2008 came just months before the collapse of Lehman Brothers.

Mr Trichet indicated interest rates would increase by only a quarter percentage point, however, and said an April hike would not have "the sense of the start of a series of rises" - although he used similar words at the start of the last tightening cycle in December 2005.

The ECB wanted to act "pre-emptively" with an interest rate "flu shot" and would see how the economy performed, said Peter Vanden Houte, European economist at ING in Brussels.

In spite of its hawkish stance on inflation the ECB shelved further steps in its "exit strategy" to unwind the exceptional support for eurozone banks it has provided since the collapse of Lehman in September 2008.

At least until July, the ECB will continue to provide unlimited loans for periods of up to three months. Mr Trichet said the pace at which such measures were dismantled had to be "commensurate" with financial market conditions.