The European Central Bank held its main interest rate at a record low 1.0 percent today, but could take a tighter line on injecting cash because the economic outlook is improving, analysts said.

The ECB policy board met as the Bank of England kept its key lending rate at a record low level of 0.50 percent and two days after Japan launched a fresh stimulus package to keep the world's third biggest economy on track.

Deutsche Bank economists, arguing that the ECB was now turning its attention to how to begin withdrawing the huge and exceptional measures taken to support the eurozone financial system since 2007, said: "The ECB holds a bias to exit."

In contrast, the US Federal Reserve and the Bank of England were believed to be mulling further economic stimulus to ensure economic recoveries in the United States and Britain.

With the ECB seemingly focused in an opposite direction, the euro has been pushed to near an eight-month high point of close to 1.40 dollars.

The European Commission warned today that the strength of the euro was "disproportionate" and could affect economic recovery across the bloc.

And the head of the IMF said he was deeply concerned about the risk of a currency war.

At Ernst & Young, senior economist Marie Diron said: "We think that the ECB will keep its recent policy stance unchanged.

"It will continue to take its cue from financial markets, letting liquidity fall if that is what banks' participation in the ECB's (market) operations imply."

Eurozone banks have been borrowing less from the ECB as interbank lending market conditions improve, encouraging central bank governors who want to unwind its unorthodox support measures.

The economy has remained on a growth path moreover, providing evidence that at least some eurozone countries could begin doing without what the ECB calls enhanced credit support.

In Germany, the biggest European economy, industrial output rose far more than expected in August, by 1.7 percent, official data showed Thursday after a surprise jump in orders boosted prospects for the entire 16-nation eurozone.

Yesterday, the International Monetary Fund raised its forecast for eurozone growth, and while the numbers are not impressive compared with those for Asia, they still argued in favour of a less accommodative monetary policy.

The IMF now expects the 16-nation economy to expand 1.7 percent this year and by 1.5 percent in 2011, up from its previous forecasts for 1.0 percent and 1.3 percent.

In Tokyo however, the Bank of Japan chose a separate path from the ECB on Tuesday, joining the US Federal Reserve in adopting a near zero-rate policy, and also approving new pump-priming measures.

In Europe, the ECB must take into account two broadly contrasting scenarios, persistent weakness in some weaker countries such as Greece, Ireland, Portugal and Spain, and sustained growth in others like Austria, Germany and the Netherlands.

Markets for bonds issued by such countries show that investors still demand a substantial premium compared with benchmark German bonds.

The ECB had to raise its own purchases of weaker eurozone country bonds by a factor of 10 last week to keep the yields -- the return earned on the bonds -- under control, and it might have to keep buying at higher levels for the foreseeable future.

Deutsche Bank economists noted that "the ECB is talking again of the 'Separation Principle,' warning markets that rates can and may rise before liquidity operations return to normal."

"Balancing the needs of the core against the periphery has been an ever-present challenge for the ECB," they noted.