The European Central Bank kept its main interest rate at a record low of 1.0 percent today, but financial markets braced for tough talk on inflation from ECB president Jean-Claude Trichet.
"The key question now is whether the ECB produces any clearer signals of a coming policy tightening," Capital Economics chief European economist Jonathan Loynes said.
The focus when Trichet speaks to media will be on updated forecasts by central bank staff for 2012 inflation.
"A rise in the 2012 figure from 1.5 percent to 2.0 percent or above would point to the need for tighter policy," Loynes said.
The ECB medium-term inflation target is just below 2.0 percent.
Barclays Capital economist Thorsten Polleit agreed, telling AFP: "For financial markets it is certainly important.
"Markets worldwide have become increasingly concerned about the latest increases in various prices including consumer prices," he noted.
Trichet "will probably use tougher wording" meanwhile to keep inflation expectations in check, Citi economist Juergen Michels added.
With inflation now at 2.4 percent, stronger economic prospects and Arab unrest driving energy prices higher, ECB governors might have to rethink their outlook that inflation will calm down early next year.
Credit and the money supply are also rising, the Bank of England could soon raise its rate from the current low of 0.50 percent and European Union leaders might not get to grips with the eurozone debt crisis later this month.
"There is a significant risk that policymakers’ impending 'grand bargain' will prove to be a damp squib," Capital Economics economists warned.
If the EU does not agree on terms that ease market pressure on Greece, Ireland and Portugal, the ECB might have to keep buying government bonds, a task it would like to see the European Financial Stability Facility take over.
Germany, the biggest eurozone economy, is opposed to that idea, however.
Polleit said Trichet would likely face questions "in terms of the ECB recommendations when it comes to structuring the European Stability Mechanism," a rescue plan to be finalised by EU leaders.
A highlight of the press briefing will be the new ECB staff forecasts for growth and inflation, and possibly decisions on liquidity strategy aimed at helping struggling commercial banks.
So-called "addicted" banks must be taken off a drip-feed of cheap loans from the ECB as it moves to exit from exceptional measures taken to battle the global economic and financial crisis.
One decision might be to end unlimited three-month loans and force banks to bid again for the funds, but fresh risks could emerge with a new and tougher set of bank stress tests to be unveiled soon.
"The overall message is likely to be that the ECB is gradually edging towards the policy exit," Loynes said.
Trichet has stressed the ECB could act on either interest rates or liquidity measures while leaving the other unchanged, but analysts think he will begin by raising "hawkish" anti-inflation rhetoric.
As for the staff forecasts, analysts expect the inflation figure for 2011 to rise from 1.8 percent to around 2.2 percent, and for 2012 many tip a forecast of around 1.7 percent, up from the current estimate of 1.5 percent.
In terms of growth, the 2011 figure of 1.4 percent could also be upgraded to about 1.7 percent, while the number for 2012 could remain at 1.7 percent.
The European Commission raised its eurozone 2011 growth forecast slightly to 1.6 percent from 1.5 percent this week after unemployment fell below 10 percent in January for the first time since July 2010.