(Repeats Sunday's story without changes)
By Martin Santa
BRUSSELS, Aug 31 (Reuters) - The European Central Bank meeting on Thursday is the prime event for markets seeking clarity on the bank's response to a stalled recovery, disappearing inflation and the sluggish pace of reform in the euro zone.
Inflation in the 9.6 trillion euro economy dropped to a fresh five year low of 0.3 percent in August and as the months fly by, the bloc's cushion against Japan-style deflation is getting smaller and smaller.
Increased geopolitical risks from the intensifying conflict in Ukraine forced Europe to impose sanctions on its third biggest trade partner Russia, a move which dented the faltering economic rebound even further.
"Pressure for the ECB to do more has returned, not only because of weak output/inflation data, but mostly following (ECB's President Mario) Draghi's speech in Jackson Hole," said Frederik Ducrozet, senior euro zone economist at Credit Agricole.
Draghi struck a new, for some a groundbreaking, tone trying to cajole European governments into agreeing a common approach to reforming their economies - a drive he sees as necessary to allow the stagnant euro zone to grow with verve.
He will have a hard time selling his message. Countries like the euro zone's second and third largest economies France and Italy are not growing and lag behind significantly with reforms.
So the ECB may have to reach deeper into its policy toolbox, with some analysts even betting on an interest rate cut at the bank's meeting on Thursday.
"We expect the ECB to cut all key interest rates by a further 10 basis points, thereby delivering a larger negative deposit rate (-0.20 pct) as well as a refi rate even closer to zero (0.05 pct)," Nomura wrote in its global market research.
Beyond the euro zone, the week is packed with monetary policy meetings, with Sweden's Riksbank, the Bank of Canada, the Bank of Japan and the Bank of England all taking the stage. The latter will be closely watched as investors seek guidance on the timing of an expected tightening.
Although no policy action from the Bank of England is foreseen on Thursday, it is still expected to be the first major central bank to lift interest rates when it makes a move early next year, just ahead of the U.S. Federal Reserve.
A string of data about the health of manufacturing in the euro zone countries and Britain will shed fresh light on how European businesses feel about their prospects amid the deepening crisis in Ukraine.
In North America, the calendar will be dominated by Friday's U.S. jobs report for August, after the Fed suggested in its last minutes that the recent good economic news makes it more inclined to raise interest rates sooner.
Markets see a U.S. rate hike coming in spring 2015.
In China, the PMI reading for August is likely to print lower as the property slowdown weighs, reinforcing expectations that further policy steps may be needed to keep economic growth on track.
Beijing will seek to implement much needed reforms to unleash fresh growth drivers and put the world's second-largest economy on a more sustainable footing over time.
The government has pledged to keep policy support "targeted" by boosting investment in bottleneck areas. The chances of imminent cuts in interest rates and bank reserve ratios for all banks look slim.
The Bank of Japan was expected to stay put this week despite household spending falling much more than expected and weak factory output in July.
Analysts said the country was, for now, in no mood to expand monetary stimulus. However, such data undermines the BOJ's rosy economic forecasts and will keep it under pressure to act if the economy fails to gather momentum.
The question most ECB watchers are now asking is when, not if, the Frankfurt-based bank will embark on quantitative easing - the printing of money to buy government bonds which is now the markets' base scenario.
Even though central banks in the United States, Japan and Britain among others embarked on such a course several years ago, the ECB has been reluctant to follow suit. This is partly due to strong resistance from German central bankers and policymakers and the perceived complexity of buying state debt in a multi-national bloc.
However, a number of economists deciphered Draghi's tone at Jackson Hole as signalling that deflationary risks had risen enough to merit further policy easing, following a rate cut in June combined with measures to flood banks with more cheap money.
The euro zone recovery stalled in the second quarter and the outlook looks poor, even with the bloc's powerhouse Germany expected to return to growth in the three months to September.
"We tend to see the first bond purchases next year. We do not expect the ECB Council to act next Thursday, because it wants to wait for the targeted longer-term refinancing operations (TLTROs) to take effect," Commerzbank wrote in its Week in Focus research. (Additional reporting by Jonathan Cable in London, Jason Lange in Washington and Kevin Yao in Singapore; Editing by Toby Chopra)