The European Central Bank yesterday voiced concerns about the risks to growth in the euro zone, indicating for the first time that its forecasts for the year might be too optimistic.

In its August monthly report the bank noted gross domestic product growth in the first half of this year was likely to have been below projected levels, adding: "This has implications for the year as a whole."

The report was published as the euro gained ground at the expense of the dollar and yen in the wake of the Federal Reserve's sombre assessment of the US economy and signs of new trouble brewing in the Japanese economy.

The single currency was changing hands for $0.8925 against $0.8804 overnight in New York, and for 109.31 yen from 108.78. The euro gained after the Fed's Beige Book on Wednesday gave a grim diagnosis of the state of the US economy.

Economists said the ECB's belated acknowledgement of the "increased uncertainty" surrounding eurozone growth prospects suggested the bank was now more open to reducing interest rates although opinion was divided as to whether it would be as early as the next meeting, on August 30.

The bank again stressed the current level of rates was "appropriate" for price stability but added that there was "a need to monitor developments closely" that might affect this assessment.

"Rates still appropriate is the mantra as it must be," said Ken Wattret of BNP Paribas. But the economic data were leading the bank's governing council towards "an easing bias".

Eckhard Schulte of Dresdner Kleinwort Wasserstein said it appeared to be just "a question of time" before the ECB cut rates. "Council members might do it at their next meeting on August 30 or they might take two more weeks to decide. But they now seem very open to cutting," he said. The ECB last cut rates, by a quarter point to 4.50 per cent, in May.

The bank said doubts about eurozone growth in the second half had increased because of the global slowdown, which had affected exports and investment, and "weaker than expected" consumption, the result of high energy and food costs. Until now the ECB has insisted that growth this year will be in line with its potential rate of 2-2.5 per cent. In June it projected real GDP growth this year of 2.2-2.8 per cent, still well above many private sector economists' forecasts. Since then growth in Germany has weakened further, with unemployment rising, business confidence falling and manufacturing sliding into recession.