The European Central Bank kept interest rates on hold on Thursday, resisting pressure for more cuts to spur an economy that is showing some signs of emerging from recession.
The Bank of England also left its rates unchanged.
The U.S. 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.
U.S. jobless claims fell for a third straight week last week and 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 U.S. 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 on Wednesday.
ECB, BOE ON HOLD
Both the European Central Bank and Bank of England opted to keep rates at record lows of 1 percent and 0.5 percent, respectively.
The BoE said it would continue 125 billion pound ($208 billion) asset-buying programme to tackle the recession, while more details were awaited on the ECB's 60 billion euro ($86 billion) plan to buy covered bonds.
The ECB has been split over whether to reduce interest rates further to spur economic recovery. ECB President Jean-Claude Trichet said on Thursday they were at an appropriate level taking into account enhanced credit support measures.
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 head 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 is not 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 flat but emerging market stocks lost 1 percent after a failed government debt sale in Latvia triggered fears the country will be forced to devalue its currency.
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.
