* Analysts forecast ECB will cut rates 50 bps on Jan. 15 to 2.0 percent
* Markets pricing in some chance of bigger 75 bps move
* Other analysts predict ECB could hold fire and signal when it will slow pace of further cuts
By Marc Jones
FRANKFURT, Jan 13 (Reuters) - The European Central Bank is expected to cut euro zone interest rates another 50 basis points to 2.0 percent on Thursday, although financial markets are still divided on how fast it will proceed with its campaign to fend off a deeper recession.
Dismal data over the last month and concerned comments from some policymakers have left markets hedging their bets on whether the ECB will match December's bigger 75 basis point cut, which would bring its main rate to a record low of 1.75 percent.
A Reuters poll last week showed that more than three-quarters of economists -- 55 out of 70 -- expect a cut on Thursday. Most opted for a 50 basis point reduction but nine of them forecast a more modest 25 point move.
The rest predicted no change this month as the Governing Council plays wait-and-see on its 175 basis points in easing since the global financial crisis deepened in October.
ECB President Jean-Claude Trichet has refused to give a clear signal on whether it will lower rates for the fourth month in a row -- in contrast to previous months -- while other policymakers have cautioned rates should not be cut too far.
Still, inflation has already fallen to 1.6 percent as the economy slows, well below the ECB's 2 percent ceiling, and Vice President Lucas Papademos has fuelled rate cut bets by saying the ECB has to act if inflation gets too low.
"The rhetoric since December has not been very encouraging for aggressive cuts and to be frank if they were consistent with that rhetoric, then they would not be cutting this month," said RBS economist Jacques Cailloux, who expects a 50 basis point cut.
"(But) in the past six months the rhetoric has been useless for predicting ECB moves, frankly, so I have given up on the rhetoric and focused on what is going on in the economy. And there the message there is pretty clear."
WEAKER BY THE WEEK
The ECB has cut rates three times since October, in total slashing rates by 175 basis points to the current 2.5 percent.
ECB Executive Board member Juergen Stark said on Dec. 10 that the room for manoeuvre on rates was "very limited, potentially allowing for small steps only".
Yet the economy is worsening by the week, with the euro zone now in recession after back-to-back quarterly drops in GDP and business confidence indicators tumbling to all-time lows.
Analysts called data on industrial output data on Friday "horrendous", and flash estimates showed euro zone inflation dropped to 1.6 percent in December, well under the ECB's target of below but near 2 percent.
"If oil prices remain at current levels, headline inflation is likely to continue to fall sharply," said Fortis Bank's Chief European Economist Nick Kounis. "Inflation will probably eventually settle comfortably below 2 percent, suggesting that the ECB has more room to cut interest rates."
The ECB's own staff last month predicted that the region's economy could shrink as much as 1 percent this year, even worse than in the early 1990s after the German post-unification boom collapsed, but the majority of analysts expect much worse.
Unemployment has climbed to a two-year high while the euro has risen against both the dollar and sterling, something which is likely to hurt exporters.
1 PERCENT?
With U.S. rates near zero, Britain and Canada's at 1.5 percent and Japan's at 0.1 percent, the current euro zone rate of 2.5 percent stands out.
With no recovery in sight, a majority of economists expect the ECB to keep cutting for much of the first half of the year. Figures derived from EONIA rates show official rates could bottom out at 1.00-1.25 percent.
Markets will be monitoring Trichet's comments closely at the post-decision news conference and some expect he might begin to indicate the cutting cycle is slowing.
After advocating hard and fast cuts in recent months, Bundesbank chief and ECB Governing Council member Axel Weber has hinted as much, warning that taking rates below 2 percent must not be taken lightly.
But analysts have urged the ECB not to stop now. "The effects of the recent cuts will start showing up no earlier than the summer," said UniCredit Chief Eurozone Economist Aurelio Maccario. "The situation is getting worse by the day and the beginning of the year has only brought pitiful news. There is no time to pause."
(Additional reporting by Ian Chua in London; editing by David Stamp)