The European Central Bank is expected to resist pressure to unveil fresh stimulus measures on October 29 but it is likely to pave the way for action in December as fresh curbs to contain the coronavirus pandemic fuel fears over a new recession.
An expanding second wave of infections is threatening to overwhelm Europe before the winter, and Germany and France - the euro zone's two largest economies - announced new lockdowns on Wednesday.
Those interventions added weight to calls for the ECB to signal even greater and longer-term support for the 19-member currency bloc's economy, which has already suffered an unprecedented recession this year.
However, having already lined up unprecedented firepower in the spring, the ECB looks to be in no hurry to act, hoping its ongoing bond buying can keep markets calm well into next year. Policymakers also appear keen to push governments to take the lead.
That puts pressure on ECB President Christine Lagarde to signal the ECB's commitment to keeping financing conditions super-easy - while not however raising market expectations so much that even sizable support in December would be seen as a disappointment.
"Lagarde needs to walk a fine line with openness to do more, without pre-committing," Danske Bank economist Piet Haines Christiansen said. "I think that risks are skewed to markets being slightly disappointed (on Thursday) rather than dovishly surprised."
The ECB announces its policy decision at 1245 GMT, followed by Lagarde's press conference at 1330 GMT.
At 0708 GMT, the euro stabilised against the dollar and euro zone stock futures pointed to a rebound after sharp falls on Wednesday.
Under the new French COVID-19 measures that come into force on Friday, people will be required to stay in their homes except to buy essential goods, seek medical attention, or exercise for up to one hour a day. They will be permitted to go to work if their employer deems it impossible for them to do the job from home. Schools will stay open.
"We think that (French economic) activity could print closer to 20% below normal during this lockdown," JPMorgan economist Raphael Brun-Aguerre said. "This would be a very significant hit assuming that activity currently runs around 5% below normal."
Germany, whose economy was already losing steam, will shut bars, restaurants and theatres from Nov. 2-30, though schools will stay open and shops will be allowed to operate with strict limits on access.
Spain, one of Europe's worst COVID-19 hotspots, may already be back in recession as the government plans to announce a six-month state of emergency, while Italy has already unveiled restrictions.
All this is challenging the ECB's view that the bloc's economy will grow back to its pre-crisis level by the end of 2022.
"The economic backdrop warrants more action now," Florian Hense at Berenberg said. "Over the past few weeks, things have turned to the worse again... Economic growth is grinding to a halt in the fourth quarter."
Inflation expectations, the ECB's main worry, are also declining. While the threat of deflation is not yet back on the agenda, inflation may not rise back to the ECB's target of nearly 2% for years to come.
But there are clear limits in the ECB's powers. Buying roughly 100 billion euros ($118 billion) of debt a month, it has already pushed borrowing costs to record lows, and even the spread between the borrowing costs of euro zone members is back to its pre-crisis levels.
Banks, flush with liquidity, already borrow for minus 1% and their biggest fear is deteriorating credit quality, not the availability of cheap funding.
Still, once the ECB has unveiled fresh economic projections after its Dec. 10 meeting, it will likely extend and expand its 1.35 trillion euro Pandemic Emergency Purchase Programme and improve funding conditions for banks.
It is also expected to keep pressure on governments to ensure budget support and finally agree on a long-delayed, 750 billion recovery package for the bloc.