FRANKFURT, Oct 26, 2007 (AFP) - A leading indicator of eurozone inflation rose more slowly in September but stayed at a high level, leading analysts to forecast the European Central Bank would remain focused on rising prices.

The broad M3 indicator of money supply grew by 11.3 percent on an annual basis, down slightly from a rise of 11.6 percent in August, the ECB said.

A three-month moving average of M3 growth rates, which evens out spikes in the figure, was 11.5 percent in the July-September period compared with 11.4 percent for June-August.

The three-month figure covers cash, overnight deposits, other short-term deposits, repurchase agreements, shares and units in money market funds and debt securities with a maturity of up to two years.

For Fabienne Riefer, an economist at Postbank, the figures will likely reinforce concern among ECB governors over inflation in the 13-nation eurozone and therefore reduce the chances that they might lower interest rates.

'Monetary developments continue to constitute a risk factor for medium term price developments,' she said.

The ECB has a medium term inflation target of below but close to 2.0 percent and watches the M3 indicator closely to help determine if consumer prices threaten to exceed that level.

The bank's main lending rate currently stands at 4.0 percent following a long rise from 2.0 percent that began in December 2005.

Observers are divided over the direction it will take next.

If bank governors are convinced inflation poses a serious threat, they could raise the rate further despite howling from some European politicians and industrialists.

At IXIS-CIB, economist Sylvain Broyer said: 'The ECB is unlikely to disarm rapidly on the inflation risks linked to monetary growth as long as a downward trend is not engaged.'

He estimated however that 'the peak in monetary growth seems to be reached.'

Broyer also noted that a breakdown of the ECB figures showed that 'loans to households are losing momentum' and estimated that tighter credit standards would increase that trend.

Banks have established stricter lending standards since the US market for high-risk mortgages, or sub-prime loans, collapsed earlier this year.

Another conclusion drawn from the ECB data was that corporate customers were shifting financing from the credit market to bank loans, UBS economist Stephane Deo said.

He said 'the ECB does not need to hike (rates) despite the increasing inflationary pressures' because market turmoil had already effectively addressed two concerns of the ECB -- excessive increases in credit and liquidity.