FRANKFURT, August 7, 2008 (AFP) - Eurozone interest rates will likely remain on hold Thursday as ECB governors get to grips with both rising inflation and a possibility the 15-nation bloc could be heading for recession.

A poll of 46 private banks by Dow Jones Newswires found all expected the European Central Bank to leave its main lending level unchanged at 4.25 percent at a rare August meeting, after raising the rate by 0.25 percent in July.

'We also do not expect any definite remarks about future monetary policy,' Commerzbank economist Michael Schubert said.

Bank of America senior economist Holger Schmieding said ECB president Jean-Claude Trichet would probably confirm the bank has 'no bias,' a remark he made already following last month's increase.

'If so, this would signal that the bank will almost certainly be on hold again in September,' Schmieding forecast.

In London, the Bank of England was likewise predicted to opt for no change from its current level of 5.0 percent in the face of slower British growth.

US Federal Reserve governors kept their main rate on hold at 2.0 percent on Tuesday after wrestling with the same dilemma of slowing activity against a spike in inflation pressures.

The ECB governing council, which does not normally meet in August, must weigh record inflation of 4.1 percent against clear signs that the 15-nation economy is weakening rapidly and might even be moving toward recession.

'For a central bank which has vowed to keep inflation close to but below 2.0 percent, this is a major headache,' Schmieding commented.

Economic conditions have deteriorated quickly and on Wednesday, data showed industrial orders in Germany, Europe's biggest economy, falling in June for the seventh month in a row.

'It suggests that the economic slowdown is now a 'symmetric shock' affecting the eurozone broadly and not only the already fragile countries such as Spain,' Bank of America economist Gilles Moec said.

In July, eurozone business activity fell to the lowest level since November 2001, according to a purchasing managers' index compiled by data and research group Markit.

Amid growing speculation the economy might have contracted in the second quarter and diminishing prospects of solid growth in the third, Jonathan Loynes at Capital Economics said the eurozone might be 'the first major economy to enter a technical recession.'

That is defined as two consecutive quarters of economic contraction.

But inflation is also at its highest level since the eurozone was formed in 1999, a result of elevated prices for oil, food and raw materials.

Oil prices that hit records close to 150 dollars a barrel in July have since fallen below 119 dollars but only after fueling demands for wage increases, a second-round effect the ECB is especially worried about.

Last Friday, the German airline Lufthansa agreed to a 5.1 percent pay raise for ground staff from July 1, along with a second raise of 2.3 percent a year later, and a bonus.

If such an increase is replicated on a broad scale, the bank has warned it would act to prevent second-round effects from driving inflation even higher.

'In recent weeks, ECB council members have been making clear that anchoring inflation expectations continues to be the ECB's key priority,' Schubert noted.

But analysts feel that with economic activity hitting the brakes, inflation will diminish next year even without higher rates.

The ECB's bank lending survey is also due a day after the rate decision and is expected to show a deceleration ahead as well.

In comments by Trichet following the rate decision, 'it will be interesting to see if the ECB continues to find growth nothing to worry about,' UBS analyst Martin Lueck said.