An economic slowdown and debt market turmoil mean the European Central Bank will probably hit 'pause' on its interest rate raising cycle for several months and may even signal on Thursday a readiness to buy bonds again.

The ECB meeting, which began at 0700 GMT, comes against a backdrop of slowing growth in the euro zone core and the spread of the bloc's debt crisis to G7 economy Italy -- a development that has alarmed policymakers and put the bank's dormant government bond-buying plan back in the spotlight.

The chief European economist for Standard and Poor's, Jean-Michel Six, said markets expect the ECB will reactivate its bond-buying operation to calm market turmoil.

Markets are still moving so we need someone to intervene, he said. The only effective fireman capable of getting us out of the building quickly is the ECB which, since the beginning of the crisis, has played an admirable role to calm markets.

The outlook for global interest rates has swung away from the sort of steady tightening begun by the ECB earlier this year and the Frankfurt-based bank meets just a day after Switzerland delivered a shock cut in its already very low rates.

The Bank of Japan also eased monetary policy by boosting asset purchases on Thursday and signaled its determination to support Tokyo's solo currency intervention to weaken the yen.

The ECB is expected to leave its key refinancing rate unchanged at 1.5 percent.

ECB President Jean-Claude Trichet, whose eight-year term expires at the end of October, is highly unlikely to indicate a reversal in the bank's policy tightening course that it began with a rate rise in April, followed by another last month.

But the euro zone slowdown means any further hike will almost certainly come in the fourth quarter at the earliest. With inflation slowing to 2.5 percent in July, Trichet is likely to indicate the ECB is in wait-and-see mode on monetary policy.

I would expect some softer comments on the economy and honestly he can afford that because the ECB has strengthened its credibility in the sense that it was the first big Western bank that went into tightening, said Gilles Moec at Deutsche Bank.

If there is one central bank that can afford to take a breather and look at the situation for six months before making any sort of additional tightening decision, that's the ECB.

The way Trichet phrases the bank's economic assessment will, as always, be key.

Risks to growth have long been described as broadly balanced, and last month the ECB reiterated it was monitoring inflation very closely, which usually means that rate hikes remain on the agenda. Any changes would be seen as a clear hint that the central bank is getting cold feet about rate hikes.

Euribor futures show financial markets have priced out further rate rises this year by the ECB, whose Governing Council holds its regular monthly monetary policy with several key members away on holiday.

BOND PROGRAMME

Trichet will hold a 1230 GMT news conference after the meeting and is sure to face questions about whether the ECB is ready to reactivate its SMP bond-buying program, which it kept in hibernation for the 18th week running last week despite markets taking aim at Italy and Spain.

With many European policymakers on holiday, there appears little prospect of urgent action on that front and the euro zone's rescue fund (EFSF) cannot use new powers granted last month to buy bonds in the secondary market or give states precautionary credit lines until they are approved by national parliaments in late September at the earliest.

That leaves the ECB as just about the only bulwark against market attacks on Italy and Spain in the short-term.

I would expect Trichet to try to raise the probability that they may intervene but no more than that, Deutsche's Moec said.

The European Union voiced support on Wednesday for Italy and Spain, whose bond yields surged to 14-year highs, but acknowledged that investors now doubt whether the euro zone can overcome its sovereign debt woes.

The agreement at the summit to broaden the scope of the EFSF was a very positive step, said BNP Paribas economist Ken Wattret.

But as there is a delay before those changes are operational, it would be very welcome if the ECB could bridge that gap by re-starting its SMP and buying across a wider range of markets.

In May last year, markets went into a frenzy after Trichet said the Governing Council had not discussed the option of buying government bonds. Just four days later, the ECB made a U-turn and started the buying program, which was internally controversial and was opposed by Axel Weber, who later quit as head of the Bundesbank.

It's possible that the ECB may reactivate it's bond-buying program, possibly even during the press conference, said Nomura economist Jens Sondergaard. (But) we need to see a sharp deterioration from here before they actually step in.

(Additional reporting by Marc Jones; writing by Paul Carrel, editing by Mike Peacock and Patrick Graham)

BNP Paribas Fixed income