The European Central Bank is expected to make it clear on Thursday that its key interest rate will stay firmly on hold at 1.5% as inflation fears ease and euro zone governments struggle with the currency union's debt crisis.
Some economists and market participants, however, are speculating that simply keeping rates steady will not be enough to get Europe out of its predicament, no matter what the bank says now.
They think that any sudden worsening of the debt crisis or a reversal for the euro zone's fragile economic recovery could force a dramatic rate cut in weeks and months ahead.
The focus on Thursday will be on President Jean-Claude Trichet's news conference at the bank's headquarters in Frankfurt. In particular, traders will seek confirmation of hints he dropped last week that the ECB is softening its assessment of inflation risks.
Trichet told a European Parliament committee that the bank's view of inflation was ''under study''. That was a noticeable shift away from the earlier view that inflation risks were "on the upside," tilted toward unexpectedly high price rises.
Economists took it as a strong hint that the ECB's key rate is now on long-term hold after two increases in April and May, which were aimed at normalising credit costs after their record lows during the 2007-2009 financial crisis.
The recent turmoil caused by the euro zone's government debt crisis and fears that it could weigh on growth have cemented those views. Indicators of business and consumer optimism have been sagging, an indication that the market volatility is shaking the wider economy, not just the financial sector.
Second-quarter euro zone growth disappointed at 0.2%, as the currency's largest economy, Germany, grew by a bare 0.1%. At the same time, the leaders of the 17 countries that use the euro are struggling to contain a crisis caused by bond market fears that some countries have taken on too much debt and will default, inflicting crippling losses on a shaky European banking system.
The ECB is a key player in that struggle through its emergency programme to buy Italian and Spanish bonds on financial markets, a risky move that has so far kept high bond market borrowing rates from sinking those countries' finances.
The bank's projections see inflation of 2.6% this year - above its goal of just under 2% - but falling to 1.7% next year. The bank's growth and inflation projects are due for revision on Thursday and those changes will provide more clues to the bank's thinking. Inflation remained at 2.5% in August.
Some experts even think that the crisis could force the ECB to make a dramatic course reversal in coming weeks or months and lower interest rates right back to 1%, as some economists have been urging it to do.
But others say the only things that could push the ECB to cut rates would be a complete collapse in European growth or a shock to the financial system like the one after the bankruptcy of US investment bank Lehman Brothers in 2008.
