FRANKFURT -(Dow Jones)- The European Central Bank is widely expected to keep interest rates on hold Thursday on volatile financial market conditions and liquidity concerns, but may flag plans to lift rates later this year.

Thirty-nine of the 51 private-sector banks polled by Dow Jones Newswires say that the minimum bid rate for the ECB's weekly refinancing operations will remain at 4.0%.

"Maintaining the status quo seems to be the most probable scenario, since it would give the central bank more time to judge the financial situation and its impact on growth and inflation," BNP Paribas economists wrote in a note to clients.

News about the exposure of some financial institutions to bad U.S. sub-prime mortgage debt has pushed down equities and led to a global liquidity crunch. This has prompted central banks to feed extra liquidity into the markets. The U.S. Federal Reserve also cut the discount rate by 50 basis points in August - an option that the ECB could adopt should liquidity concerns persist.

"It would be surprising for the European Central Bank to further tighten monetary conditions within the current context: its U.S. counterpart looks likely to cut Fed Funds at least twice, in September and October, in order to cushion the impact of the sub-prime crisis...and no one is yet able to get a clear idea of the fallout from the credit crisis," Natixis economists said in a research note.

ECB President Jean-Claude Trichet and executive board member Lorenzo Bini Smaghi have also both hinted that a September rate hike is off the table.

Trichet said last week that the governing council's previous stance of early August, which at that time indicated a rate hike on Sep. 6, was issued before liquidity concerns erupted.

Elevated money market rates represent "a tightening of monetary conditions, equivalent to a 50 basis point hike in official rates under normal circumstances," said Jose Luis Alzola, a Senior European economist at Citigroup.

At 0945 GMT, overnight rates traded at 4.34%-4.46%.

Demand at the ECB's weekly main refinancing operation Tuesday was strong, with the ECB awarding funds at a rate of 4.15% and higher.

But inflationary pressure, and resilient real economic data may still prompt the ECB to hike rates later this year, economist said.

In particular, ECB staff may revise up their inflation projections for 2007 to an annual rate of 2.1% from 2.0% currently. The ECB aims to anchor inflation at a level "close to, but below" 2% over the medium term.

Trichet will present ECB staff's independent projections for euro zone growth and inflation at the press conference following Thursday's rate verdict.

Economists will also listen carefully to Trichet's assessment of current market conditions and whether he uses the "vigilance" key word that typically indicates a rate increase at the next rate-setting meeting on October 4.

Ten of the 51 economists polled by Dow Jones Newswires expect the ECB to lift rates to 4.25% Thursday. Thirty-three economists see rates hitting 4.25% by year-end.

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