The European Central Bank (ECB) is almost certain to keep rates unchanged at 2.5 per cent today.
Manufacturing and business activity were their strongest in over five years in March and German business sentiment soared, causing analysts and financial markets to prepare for a May hike.
When the Governing Council meets today it will face an economy that analysts say may be growing close to its trend rate of around 2 per cent, while interest rates are barely higher than inflation.
"The ECB is uncomfortable with rates where they are, and they would like to get them back to a neutral level if data supports it. They won't disabuse the market of the notion of a rise in May," said Michael Hume, an economist at Lehman Brothers. Analysts view an April rise as improbable.
ECB President Jean-Claude Trichet has repeatedly said that the central bank, which tightened credit by a quarter percentage point in March, plans no back-to-back rate rise like the US Federal Reserve. But it is clearly uncomfortable with rates this low.
Mr Trichet recently described financing conditions as "extraordinarily favourable", and Governing Council member Yves Mersch said the central bank "cannot be careless about the risk of inflation expectations edging higher".
Inflation in the euro zone, an estimated 2.2 per cent in March, is above the ECB's 2 per cent tolerance threshold. Moreover, confidence indicators like the European Commission's economic sentiment gauge, near a five-year high, provisionally support the ECB's view of a broadening recovery.
But economists will closely scrutinise Mr Trichet's comments at the post meeting press conference for direction on future policy.