The European Central Bank (ECB) is expected to toughen its anti-inflation stance at its meeting today without altering course on interest rates.
Steady rates, held at 2 per cent for well over two years while the economy gets onto a firmer footing, would shift some attention away from monetary policy to Bank of Italy Governor Antonio Fazio, under criminal investigation for his handling of a foreign bank takeover.
ECB President Jean-Claude Trichet probably will release a legal opinion on proposed reforms to the Bank of Italy, a central banking source said.
The Bank of England also is expected to keep rates steady at its meeting today.
Reforms to the Bank of Italy were drawn up when disputes mounted in the Italian government over Mr Fazio's role in the bank takeover fight.
Critics charge he tried to thwart a Dutch bid for an Italian bank in favour of a family friend, and Italian prosecutors have opened a criminal investigation into Mr Fazio.
But Mr Fazio has not been charged with any wrongdoing, is being backed by the Bank of Italy's board and has resisted calls to resign.
Recent positive data suggest that growth in the euro zone economy is finally gaining some traction. The manufacturing and service sectors are showing surprising vigour and business confidence has strengthened the past month, despite persistently high crude oil prices and political uncertainty in the euro zone's largest economy Germany.
However, the inflation outlook has deteriorated. Consumer prices rose at a 2.5 per cent annual rate in September, money supply surged in August, inflation expectations in surveys and market indicators have risen the past three months, and import prices are under threat now the euro is below $1.20 against the dollar.
This mix of strengthening growth and inflation has markets expecting harsher warnings over ECB inflationary vigilance and perhaps even a vague hint over the timing of a future rate rise.