The European Central Bank Thursday kept its key, short-term interest rate -- the refinanced rate -- the same at 4%, the bank announced.

The ECB said its most recent data confirmed the existence of strong, short-term upward pressure on inflation. The bank went on to say that Europe is "experiencing a rather protracted period of temporarily high annual rates of inflation, resulting mainly from increases in energy and food prices." Hence, upside risks to the price stability remain, the ECB added, necessitating the stand-pat monetary stance.

Trichet is resolute

In general, economists and analysts had expected the stand-pat stance, given the acceleration of inflation in the euro-zone. ECB President Jean-Claude Trichet indicated as much in his post-ECB meeting news conference.

"We believe that the current monetary policy stance will contribute'' to bringing inflation under control, Trichet said, according to Bloomberg News. "The firm anchoring of medium- to longer-term inflation expectations is of the highest priority.''

Further, for at least the time being, the ECB does not appear to be concerned about the euro's steady, two-year rise versus the dollar. The euro rose to a record $1.5913 versus the dollar Thursday morning before paring gains to trade around $1.5830 Thursday at mid-day.

The euro is up about 33% versus the dollar since January 2006. A stronger euro makes European exports harder to sell because it raises the cost of exports as European producers increase the price of their goods to compensate for foreign currency depreciation. Some European companies, commercial aerospace giant Airbus among them, have complained that the euro's rise versus the dollar is beginning to affect their competitiveness.

Global economy considerations

In addition to inflation, another factor that may also be holding the ECB back regarding monetary easing concerns the ongoing resolution of the credit crisis, according to economist David H. Wang. Wang said with the U.S. Federal Reserve having cut short-term interest rates by 300 basis points since September 2007, and the Bank of England also easing monetary policy, the ECB's stance "may be part of a discussed, if not coordinated effort among the major central banks" to have the ECB play the lag-role in monetary policy as the global economy continues to recover from the subprime mortgage and related asset defaults.

"The Fed and the Bank of England are providing monetary stimulus now. China is not a full monetary player yet, and Japan can not provide ample monetary stimulus, so the major central banks could have placed the ECB in the role of back-up monetary support," Wang said. "In that way, if the Fed's and the U.K.'s monetary stimulus fails to get those economies growing again, we'll have the ECB as a 'second-wave' monetary support with interest rate cuts to spur growth in Europe and abroad."

"Of course, no one wants to see a global economy in a condition that would require that 'second-wave' of cuts by the ECB, but you get my point," Wang added.