The European Central Bank is set to keep interest rates on hold, resisting pressure for more cuts to spur an economy that has shown some signs of emerging from recession.
The US Federal Reserve, which like the Banks of Japan and England has cut rates below the ECB's one percent, is already looking ahead to the need to tighten policy to control the impact of recent massive stimulus.
With central bank interest rates around the world at record lows, policy makers face a tough call on when to start mopping up the flood of liquidity unleashed in the past year.
Although much of the economic news remains grim, there are daily signs of improvement.
Euro zone retail sales inched up month-on-month for the first time in five months in April, signalling consumer demand is faring better than expected despite the worst recession since World War Two.
British house prices also rose at their fastest monthly rate in 6-1/2 years in May.
Long-term bond yields have started to rise globally as markets absorb massive government bond supply issued to raise funds for economic stimulus plans. Fears that this could stunt any recovery are now grabbing investor attention.
"The market will remain shaky. After a decent performance for three months in a row, people are getting tempted to take some profits despite the fact that we are seeing more and more green shoots," said Franz Wenzel, strategist at AXA Investment Managers, in Paris.
Federal Reserve Bank of Kansas City President Thomas Hoenig said the rise in long-term US bond yields was a warning to the Fed to begin tightening monetary policy to nip inflation risks.
"Starting from where we are today, it is clear that interest rates must rise," Hoenig told a business audience yesterday.
ECB, BOE ON HOLD
Both the European Central Bank and Bank of England and are expected to keep rates at record lows of 1 percent and 0.5 percent, respectively, when they announce policy decisions later today.
Markets are looking for details on the ECB's 60 billion euro plan to buy covered bonds, and how the BoE's 125 billion pound asset-buying programme is progressing.
The ECB has been split over whether to reduce interest rates further to spur economic recovery. While some policymakers have said they are unwilling to go below 1 percent, ECB President Jean-Claude Trichet refused to confirm last month whether rates were at their lowest ebb, saying merely they were appropriate.
There are signs of improvement globally, said Swiss National Bank Vice Chairman Philipp Hildebrand, who suggested the world economy was nearing a turning point.
"Various data point to that: positive signs from Asia, in particular China, rising oil and commodity prices. Trade is not in free fall anymore either," Hildebrand told Swiss weekly WOZ, in an interview.
International Air Transport Association Managing Director Giovanni Bisignani told Reuters the slump in air freight had probably bottomed but there were no signs yet of improvement.
Japanese companies, however, cut spending on plant and equipment by a record 25.3 percent in the first quarter of 2009 from a year earlier, underlining the extent of Japan's economic contraction in the first quarter.
Japan's economy is likely to grow only gradually from the second quarter as foreign demand isn't strong enough to encourage manufacturers to boost spending on plant and equipment. Falling wages and a rising jobless rate will also weigh on growth in coming months, economists say.
European stocks were steady ahead of the ECB rate decision and US stock index futures pointed to a higher open on Wall Street after yesterday's sell-off.
Oil prices rose around $1 to $67 a barrel after the previous day's decline on expectations that an economic recovery will drawn down stocks.