Eurozone interest rate setters face the toughest call of their long battle against red-hot inflation Thursday, when they decide whether to raise borrowing costs again or finally pause the unprecedented hiking campaign.
The European Central Bank is struggling to navigate competing data that could push them either way -- prices continue to rise fast, but the outlook in the single currency area is also deteriorating rapidly.
The central bank for the 20 countries that use the euro has already lifted rates by 4.25 percentage points since July last year to combat runaway consumer prices.
But analysts are divided on whether they will implement another 25-basis-point increase -- which would be the 10th straight hike and take the closely watched deposit rate to a record high -- or take a pause.
Whether the ECB lifts rates "one final time... remains a close call", said Berenberg Bank economist Holger Schmieding.
On the one hand, prospects for the single currency area are looking bleaker.
Recent data showed eurozone second-quarter growth reached just 0.1 percent, lower than previously estimated, and the EU on Monday slashed its 2023 and 2024 GDP forecasts for the single currency area -- pointing in particular to weakness in Germany.
Europe's top economy is struggling to get back on its feet after sliding into recession around the turn of the year, hit by an industrial slowdown, high energy costs, and slowing exports to key partners such as China.
- Take a break? -
The weak data has fuelled calls for the ECB to pause its hiking cycle for fear it could deepen a downturn, and president Christine Lagarde finally opened the door to doing so at the bank's last meeting in July.
On the other hand, consumer prices, which began surging after Russia's invasion of Ukraine due to galloping energy costs, continue to rise strongly.
This would support arguments for another hike to borrowing costs, with the aim of further depressing demand and slowing inflation.
Consumer price rises came in unchanged at 5.3 percent in August, way above the ECB's two-percent target.
While inflation has slowed since last year as energy costs fall, officials are now worried that other factors, particularly wage increases in a tight labour market, are keeping it elevated.
The data makes for a "very complicated mixed bag", said ING economist Carsten Brzeski.
"We expect a very heated debate with a close outcome."
Even if the ECB does opt to stay its hand Thursday, analysts still think it is likely to impose at least one more hike at a later meeting.
This would be similar to what the US Federal Reserve has done -- taking a break in June before resuming lifting rates again in July.
The Fed and the Bank of England are due to hold their next meetings the week after the ECB.
- Hawks versus doves -
ECB officials have insisted their decision will depend on incoming data, which has put the focus on updated forecasts the central bank is also due to release on Thursday.
In the run-up to the meeting, they have mostly been cagey about what will happen, a contrast to other recent meetings where the decision was usually well telegraphed in advance.
And mixed signals have emerged.
Governing council member Peter Kazimir called for another 25-basis-point hike, with the Slovak central bank chief writing in an op-ed it is "better to be safe than sorry".
But another member, Italian central bank boss Ignazio Visco, disagreed with those who think it is better to overdo it, rather than undershoot, while ECB chief economist Philip Lane welcomed signs inflation was easing in some areas.
Analysts stressed it was far from clear whether the "hawks", backers of further tightening, or "doves" -- proponents of a pause -- would prevail on Thursday.
There are "few powerful arguments to win over either side", noted Gilles Moec, chief economist at Axa insurance.
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