The European Central Bank held its main interest rate at 2.25 per cent today, although President Jean-Claude Trichet is likely to prepare financial markets later for an increase in March.
Mr Trichet will explain the Governing Council's views at a news conference at 13.30pm, and analysts are all ears for whether he will revert to his watch words over inflationary risks.
"If you hear Trichet saying that he and other Council members are vigilant - it doesn't matter about what - read this as a signal that he intends to hike rates in four weeks," said Kornelius Purps, fixed-income analyst at HVB in Munich.
Since the Council's last policy meeting three weeks ago, data have shown euro zone inflation, at 2.2 per cent, remains above the ECB's ceiling and economic growth prospects are mixed.
Markets are anticipating a slightly more hawkish tone at the news conference after Spain's central bank noted today that ECB rates were accommodative, and Bundesbank President Axel
Weber said last Friday that the ECB was ready to act quickly to raise rates if needed.
However, some data have sent mixed signals, which could make reaching consensus on a March rise more difficult. Job cuts pressured the PMI manufacturing index in January slightly,
retail spending in France fell and a rising euro raises questions over how much the region can rely on export strength.
So far the ECB has said it plans no series of rate increases. ECB staff will update their economic projections in March, giving Council members a better sense of the outlook.
Financial markets firmed a little after the ECB held rates steady. The euro ticked upward to $1.2068 against the dollar from $1.2066 before the announcement, and the June Euribor futures contract rose to 97.105 from 97.100.
