FRANKFURT -- Shrugging off the euro's recent weakness, the

European Central Bank

decided to hold its main refinancing rate at 3.25% Thursday, signaling Europe's monetary authorities aren't concerned that the region's economic recovery is causing inflationary pressures to get out of hand.

Although many observers didn't expect a change in borrowing costs only one month after a quarter-point hike on Feb. 3, speculation surfaced earlier this week that the ECB might be tempted to use a rate hike to prop up the ailing euro after it hit an all-time low against the dollar. The euro recently edged slightly higher to $0.9724.

Investors closely watch the central bank's actions, which impact the borrowing costs of European companies and affect exchange rates. A weaker euro, for example, helps European companies export more to the U.S. and other countries and boosts the euro-denominated value of repatriated profits, helping corporate performance.

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Thursday's inaction, however, simply moves the expectation for a rate hike to the next meeting of the bank's Governing Council with a prescheduled press conference on March 30 in Madrid. While there's some disagreement over whether the ECB will change monetary policy at the central bank's one meeting outside Frankfurt this year, many analysts believe ECB President

Wim Duisenberg

will have to act by April at the latest to keep the eurozone's economic recovery from overheating.

The big laggard European economies of Germany and Italy have benefited in recent months from the weak euro, as their exports became cheaper to overseas buyers. However, with the region's slowest-growing countries apparently back on their feet, the ECB will have less reason to tolerate monetary conditions that Duisenberg has repeatedly called "generous" and that could spark inflation.

On Tuesday, a report showed consumer prices in the eurozone increased in January by 2.0% year on year, which is the ECB's limit for maintaining price stability on average for the entire year. Although the latest jump in inflation has largely been due to spiking energy prices, it will only be aggravated by the euro's latest slump, as the currency's weakness makes imported goods like oil even more expensive.

The ECB sets monetary policy for Germany, France, Italy, Spain, Portugal, the Netherlands, Belgium, Finland, Luxembourg, Ireland and Austria.