A one-track message that Germany's economy is growing solidly, production expanding, and inflation creeping up left financial markets more convinced than ever that a German interest rate rise is not far away. The Bundesbank meets today amid speculation that it will abandon its fixed "repo" interest rates and move to a policy of adjusting the "repo" money market rates to reflect monetary conditions.

But while market sources believe the Bundesbank is moving closer to adopting variable rate securities repurchase agreements, it will not be quite ready by today's tender announcement. Reinforcing the Bonn government's own forecast - repeated last week - for economic growth of almost 2.5 per cent this year, the International Monetary Fund (IMF) predicted the economy would grow 2.3 per cent in 1997 and 2.6 per cent in 1998.

The federal statistics office released August consumer prices data showing annual inflation at two per cent, hitting the psychologically important level seen by the Bundesbank as a danger zone for the first time since April 1995.

And the Bundesbank surprised markets with a strong upward revision to June German industry output, taking the pan-German year-on-year growth figure to three per cent from 1.4 per cent.

The focal point of Bundesbank policy is the repo tender with many analysts looking for the central bank to soon abandon the fixed rate tender, offering funds at a variable rate which many expect would climb above 3 per cent.

The so-called repo rate, the focal point of Bundesbank policy, has been anchored at three per cent for over a year.

The Bundesbank also faces international pressure to keep interest rates low in order to help other nations qualify for European monetary union.

The IMF also welcomed Bonn's fiscal reforms.