The European Central Bank is set to begin the delicate process of phasing out its financial crisis support on Thursday, backed by new staff forecasts which should show greater economic optimism.
With markets still some way from normality, all 80 economists in the latest Reuters poll expect interest rates to be kept at 1 percent.
Instead the focus will be on what ECB President Jean-Claude Trichet says about scaling back the emergency lending it has used to get the euro zone's financial system through the credit crisis and limit the recession.
The meeting got underway at 0800 GMT (3 a.m. EST). The interest rate decision is due at 1245 GMT (7:45 a.m. EST) and the other key information will come when Trichet and Vice President Lucas Papademos hold their usual post-meeting rendezvous with the media at 1330 GMT (8:30 a.m. EST).
Trichet has dropped a number of hints since the last policy meeting that this month's handout of one-year loans will be the last, while he and other policymakers have stressed the ECB's support will not be needed to the same degree going forward.
The ECB is set to confirm its decision to stop 12-month refinancing after December, said Nomura economist Laurent Bilke. Beyond that, we look for some limited restrictions to 6-month maturity operations, such as reducing their frequency.
For graphic on euro zone short-term interest rates implied by futures prices
For graphic on ECB monetary stimulus
For graphic on euro zone inflation
For graphic on euro zone GDP
The expected moves would bring an end to more than a year of intensive policy easing by the ECB and herald a change of direction.
But policymakers will probably to want to avoid pushing a rapid exit plan at this stage with countries like Spain still in the grip of recession, unemployment set to rise further and an already-strong euro threatening to sap the fledgling recovery.
With weaknesses still lurking in the euro area economy, and underlying price pressures subdued, we think the ECB will rightly shy away from removing its stimulus in a more aggressive fashion, said Daiwa Securities' European Economist Colin Ellis.
Some central banks such as Australia's and Norway's have already begun to raise rates. But the U.S. Federal Reserve has stuck to its commitment to ultra-low interest rates while taking some small steps to wind down its emergency support.
At the far end of the scale, the Bank of Japan this week offered to pump more funds at banks to lower longer-term money market rates.
Markets are also hoping to hear how long the ECB plans to keep uncapped lending in place, while the rate of interest it charges on the one-year funds will be seen as a key indication of its mood and future interest rates moves.
It has the option of either leaving the cost of borrowing at its main interest rate or charging banks a little bit more.
The latter would be taken by traders as a signal it intends to raise rates at some point next year, but another option that now appears under discussion would be to have the one-year rate track any future benchmark rate hikes.
The new expiry date that the ECB puts on support measures will also be key. We think a reasonable horizon for (when measures will be extended to) would be April 2010, said Bilke.
It is sufficient for the new scheme to be effective while not tying up the ECB for too long. A longer horizon toward mid-year is also possible, but any shorter than April would sound hawkish to us.
A new set of ECB staff forecasts on the economy are also due. For the first time they will stretch as far as 2011.
The answer (to how fast the ECB unwinds support) lies in how well the economy does after New Year, and therefore the key issue tomorrow is their new staff forecasts, said Goldman Sachs economist Erik Nielsen.
Markets are expecting a hefty upgrade to 2010 growth given the euro zone's emergence from recession in the third quarter. Inflation numbers should also be nudged up after a stronger than expected return to positive territory last month.
They will upgrade staff forecasts but remain relatively cautious, said HSBC economist Janet Henry, who expects 2010 growth at a mid point of 0.8 to 0.9 percent compared with the 0.2 percent seen in the ECB's last forecasts.
She added 2011 numbers should show inflation -- the ECB's main focus -- still well under its target of close to but just below 2 percent, noting that would keep down chances of a rate hike before September.
With the economy still in a delicate phase, Trichet is expected to say that the bank's record low 1 percent interest rate remains appropriate.
He is also expected to employ a verbal shove or two during the post-rate decision news conference to try to push down the euro down having seen it jump back above $1.50.
He and other European officials failed last week to convince China to let its currency appreciate, but were he to sharpen his tone on the euro's rise, it could rattle the common currency.
(Reporting by Marc Jones; Editing by Ruth Pitchford)