* Economists split on whether ECB will cut rates in 2013
* In any case, rate cut unlikely on Thursday
By Andy Bruce
LONDON, Jan 7 (Reuters) - The European Central Bank will
keep interest rates unchanged this week, economists forecast in
a Reuters poll, but they cannot agree on the chances of a cut in
the next few months due to a murky economic outlook.
While a large majority said the Governing Council will hold
the main refinancing rate at a record low 0.75 percent at its
Thursday meeting, there was no consensus over its next move,
reflecting a similar split among policymakers themselves.
A wafer-thin majority - 38 out of 73 analysts polled over
the last few days - said the ECB will remain on hold for the
next three months. The majority shifts to a 25 basis point cut
by the end of June, but by a margin of only one respondent.
There are two schools of thought.
In one are those who point to poor economic data for the
fourth quarter that signal a deepening euro zone recession. They
argue that this warrants another cut, no matter how limited its
effect may be as rates are already near zero.
With the sovereign debt crisis festering, there are few
signs of an early turnaround for the euro zone economy, although
business surveys last week suggested the recession may at least
have passed its nadir.
On the other side are those who say ECB President Mario
Draghi has shown no inclination to repeat last July's rate cut.
Instead he seems to be waiting for the results of the bank's
programme to buy the bonds of troubled euro zone governments -
which has yet even to start.
That means the most likely outcome is that the ECB stays on
the sidelines, at least for now.
"The Council's divided, the outlook's uncertain," said Alan
Clarke, economist at Scotiabank. However, he said policymakers
usually reach consensus rapidly once the economic outlook
becomes clearer. "It doesn't unduly disturb me there's a split,
because as the euro zone's demonstrated in the last year or two,
things can change just like that," he said.
Clarke thinks the ECB is more likely to stay on hold. The
Governing Council is already pessimistic about the economic
outlook, so data would have to worsen yet more for members to
swing behind another rate cut.
The euro zone economy has shrunk for three consecutive
quarters, with GDP down 0.6 percent year-on-year in
June-September 2012. A flash estimate for the fourth quarter is
due on Feb. 14.
The Reuters poll was conducted before global regulators gave
banks four more years and greater flexibility to build up cash
buffers so that they can use some of their reserves to help
struggling economies to grow.
Disagreement among the forecasters merely reflects the split
among the ECB's own policymakers. Board member Yves Mersch was
quoted last month as expressing his opposition to cutting the
refi rate any further, saying he had not heard Draghi making any
departure from the current policy line.
However, Governing Council member Jozef Makuch said the bank
had a "very serious debate" last month about cutting interest
There was similar debate among survey respondents over the
meaning of Draghi's comments at the December meeting that the
Council had a wide-ranging discussion on interest rates.
"The markets over-interpreted the dovish comments by Mario
Draghi in December," said Lena Komileva from G+ Economics.
She forecast a cut in the second quarter, but added: "While
the ECB's bias will remain dovish over the next 12 months, the
decision to cut rates again will depend on the will of a small
minority of core euro zone countries rather than the euro zone
Others, such as Christian Schulz from Berenberg Bank, reckon
the economy will show enough progress for rates to stay on hold
for the time being. He expects the ECB to raise the refi back to
1 percent by the end of the year, which represents the most
hawkish forecast in the poll.
"The recovery should start to gain a little bit more pace
towards the end of the year," said Schulz, adding that the ECB
would lead the main central banks in tightening policy. "The ECB
will want to reassert inflation-fighting credentials by raising
rates first again, as in 2008 and 2011."
Euro zone inflation held steady at 2.2 percent in December
despite expectations of a fall, only a little above the ECB's
target ceiling of 2 percent.
(Polling and analysis by Ruby Cherian and Somya Gupta; editing
by David Stamp)