The European Central Bank is expected to keep interest rates at a record-low 1.0 percent on Thursday and its head Jean-Claude Trichet will probably caution against high hopes of a speedy economic recovery.
The 16-country bloc is likely to have exited the worst recession since World War Two in the third quarter of the year but all 82 economists in a Reuters poll said they see no move in interest rates for the fifth month running, with most expecting them to stay unchanged until late next year.
The meeting, now underway in Venice, Italy, is the second of the two rate meetings held annually outside the ECB's Frankfurt base, and marks the first anniversary of coordinated rate cuts by major central banks in the aftermath of the Lehman Brothers collapse.
The Reserve Bank of Australia on Tuesday became the first Group of 20 central bank to raise rates after the global recession, but the ECB is not expected to follow suit for some time.
While most analysts expect the next rate move to be a hike, they forecast that it will not happen before the third quarter of next year. But tighter liquidity conditions may push up market rates before that, futures pricing shows.
The Bank of England will also publish its rate decision on Thursday, and it is expected to keep its rates on hold at 0.5 percent.
At his news conference, ECB's Trichet is seen confirming that current policy settings are appropriate and markets will listen any clues on the timing and order of the ECB's exit strategy.
Current rates are appropriate, that is a key sentence that will probably stay until well into next year, Bank of America economist Holger Schmieding said.
But the ECB is unlikely to detail its exit strategy, just to repeat that it can exit when needed, he added.
Trichet's comments on how governments should wind back their extra spending and how the ECB will take fiscal exit into account in its monetary policy decisions will also be key.
They will definitely not do any explicit coordination (between fiscal and monetary exit strategies), Schmieding said, but added: There might be actually be a case that if fiscal policy is tightened in 2011, the ECB may take that into account and thus have an indirect impact on its rate policy.
Trichet's comments on economic recovery will also face close scrutiny. The euro-zone economy shrank by a revised 0.2 percent in the second quarter of the year, and analysts expect it to have grown 0.3 percent in the July-September quarter.
But even though the ECB meets in what many say is the most romantic city in the world, the Trichet is not expected to shower the markets with love, but caution on too much optimism.
ECB policymakers have said the road ahead would be bumpy, and Trichet is unlikely to change his tune just a month after the latest set of ECB staff economic projections.
He said a month ago the ECB sees a very gradual recovery.
Trichet is also likely to repeat the Governing Council sees risks to growth and inflation as balanced.
We may have turned a corner, but it is going to be a very hard slog ahead, said Lloyds TSB analyst Kenneth Broux. I don't think there is any reason for the ECB to make any changes to the economic outlook.
Analysts are also looking forward to hearing the ECB's views on foreign exchange rates, after European policymakers expressed concern about the strong euro.
The euro has gained roughly 3 percent against the dollar since the ECB's September rate meeting and about 16 percent in the last seven months.
The Group of Seven countries at meetings in Istanbul stuck to their earlier statement warning against excessive volatility but Trichet said in an interview with Reuters Television on Tuesday that rebalancing the global economy did not mean the dollar should depreciate against the euro.
I don't think he will be more specific and go beyond that, Bank of America's Schmieding said.
The dollar has continued to be under pressure even after policymaker comments and investors wary of the weakening dollar drove gold prices to a new record high on Thursday for the third day in a row.
Markets also expect to hear the ECB's view of last week's 12-month tender, which saw demand fall to just 75 billion euros from 442 billion in June -- reducing the amount of extra liquidity in money markets.
Broux said there were two possibilities for the decline.
Some argue the big decline is a measure of health of the financial system and financial institutions in the euro zone are generally better positioned, he said. Or you could argue there was not enough collateral to take away more funds.
It is most likely too early for the ECB to reveal details of the December 12-month tender, Broux added.
Thursday's meeting is also the last one before the ECB publishes its third-quarter bank lending survey, and Trichet might give some preliminary details of the study, eagerly awaited by analysts.
Some small and medium-sized companies have said access to loans is hampered, and politicians have warned of a credit crunch forming, but ECB policymakers have stressed the demand side in explaining slow credit growth.
Trichet is likely to downplay the results of the survey, especially if they confirm expectations of credit standard tightening ending, Bank of America's Schmieding said.