Eurozone figures that showed easing economic confidence and steady inflation failed on Friday to dispel a cloud of uncertainty over the outlook for ECB interest rates, economists said.
But while many economists are banking on the European Central Bank holding off on an interest rate hike at its next monetary policy meeting on September 6, mixed data left them divided about the outlook after that.
Although business and consumer confidence weakened, economists said it remained at high levels consistent with firm economic growth, which could support the case for lifting interest rates in normal times.
However, recent turmoil on financial markets over concerns about a credit crunch have clouded the outlook for ECB action, with many economists predicting the central bank would hold rates steady.
Economic confidence in the 13 countries that share the euro fell in August to the lowest point in six months, according to a widely-watched survey from the European Commission.
The Commission's eurozone economic sentiment indicator pulled back in August to 110.0 in the single currency bloc from 111.0 in July, roughly in line with economists' expectations.
"Although this might suggest that the economy has lost a little steam, it remains consistent with very strong GDP (gross domestic product) growth of around three percent year-on-year," said Jennifer McKeown at consultancy Capital Economics.
While consumer confidence in particular was weak, separate data showing the eurozone jobless rate steady at an all-time low of 6.9 percent in July should help household spending in coming months, economists said.
Meanwhile, annual inflation remained at 1.8 percent in August, according to a first estimate from the European Union's Eurostat data agency, marking the 12th-month running that price increases remained below two percent.
Ever eager to keep prices from growing too quickly, the Frankfurt-based central bank prefers to see an inflation rate of close to but less than two percent.
Before serious concerns about a credit squeeze began to emerge in mid August, the ECB had signalled that it intended to raise interest rates at its next monetary policy meeting on September 6.
Bear Stearns economist David Brown warned that the rapidly developing situation on financial markets and in the economy had made a rate hike next week inappropriate.
"The monetary landscape is changing dramatically, with increased financial market uncertainty and softening economic fundamentals warranting a definite change in tune from the ECB," he said.
However, Capital Economics' McKeown said that even if the ECB did hold off on raising borrowing costs next Thursday, it would probably resume raising in October in order to keep inflation in check.
"While price pressures look contained for now, the ECB will still see upside risks in the medium term," she said. "Although a September hike now looks unlikely, we think that the next move could come as soon as October."
Eager to keep inflation under control as economic growth picks up, the Frankfurt-based central bank has raised eurozone borrowing costs a total of eight times since December 2005, each time by a quarter of a percentage point.
The eurozone's main interest rate currently stands at 4.0 percent.
