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BERLIN -- Everybody knows interest rates in the eurozone aren't likely to linger at their current 3.25% for very long, but the exact timing of the next hike is uncertain.

Although many observers believe the

European Central Bank

will let the last quarter-point hike from Feb. 3 sink in for awhile before moving again, an outside chance remains Europe's monetary authorities could increase borrowing costs in the 11-nation euro area as soon as the coming week.

The uncertainty is partly a function of the relative newness of ECB as an institution but also because Europe's central bankers have often botched the job of appropriately telegraphing their intentions to the market. Speculation over next Thursday's meeting of the bank's Governing Council has been heightened because so far the bank has only announced changes in monetary policy at the first of its two monthly meetings. This presumably occurred because only the first meeting includes a press conference for President

Wim Duisenberg

to explain why they did the deed.

Luckily for those allergic to higher interest rates, however, data on Friday appeared to show Europe's recovery might not accelerate to a dangerously breakneck pace. Besides modest inflation figures for France and Germany, one of the ECB's most-watched indicators, M3 money supply, accelerated at a slower 5% rate than had been expected in January. Although the ECB has warned money supply figures could be volatile in the first couple years of monetary union, the decrease may allow the central bank to hold off a bit longer before ratcheting rates upward again.

"Anything that takes the market's mind off imminent interest rate hikes, preventing the ECB from being boxed in a corner by market expectations at each ECB meeting, is just what they need right now," says Alison Cottrell, an economist for

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PaineWebber International

in London.

The next meeting with a press conference should be an interesting one. The ECB has decided to occasionally hold their deliberations outside of Frankfurt to show that the bank sets policy with the entire eurozone in mind and not just Germany. With the March 30th meeting set to take place in Madrid a whole other set of variables comes into play. Will the ECB refrain from adjusting borrowing costs because they are in Spain, or will they purposely raise rates there to underscore how pan-European the bank is? Some observers reckon the latter seems more likely.

In its weekly European economics outlook from

Barclays Capital

in London, the attraction for a hike in Spain is made plain: "A rate move in Madrid would be a nice counterpoint to the fear expressed, particularly before the start of EMU, that a Frankfurt-based ECB would deliver an excessively austere monetary policy with 'Made in Germany' stamped on it.

A 'Made in Madrid' rate move

would prove the ECB is running a genuinely pan-European monetary policy."

An increase in rates at the Spanish meeting would certainly be deemed appropriate by many since it has long appeared as if the concerns of smaller, faster-growing economies such as Spain, Finland and Ireland were taking a back seat to the ECB's worries for the region's big laggards Germany and Italy. But whether the ECB will see things the same way is anybody's guess.