The ECB will likely wait until late 2011 before hiking interest rates, according to a Reuters poll of over 70 economists who stayed cautious in July despite some encouraging economic data.

Median forecasts showed the ECB's main refinancing rate on hold at 1.0 percent until the third quarter of next year, when it is seen rising to 1.25 and then 1.50 percent by the end of 2011 - unchanged from last month's poll.

And for the first time since the ECB cut its benchmark rate to a record low 1.0 percent in 2009, not one economist in the sample forecast a rate rise by the end of 2010. One year ago, more than two-thirds of economists were expecting one.

German business morale and flash euro zone purchasing managers' indexes for July published last week were surprisingly strong, but data this week showing a decline in bank lending in June tempered some of the optimism.

While the results of stress tests of 91 banks operating in the EU on Monday were also seen as positive, economists looked unwilling to move their rate forecasts forward as a result.

"Despite the stronger activity and the publication of the banking stress test results, sentiment remains fragile and there is little activity in the form of private consumption," said Azad Zangana of Schroders.

"This suggests that interest rates may have to remain still for some time."

No economist forecast a rate hike at the ECB's August meeting and they gave only a one-in-ten chance of one before the end of the year. On Friday, ECB President Jean-Claude Trichet called on industrialised countries to cut spending immediately in order to consolidate the economic recovery. But that was starkly at odds with comments from his U.S. Federal Reserve counterpart Ben Bernanke, who a day earlier spoke largely of more ways to ease policy rather than a withdrawal of stimulus. "The jury is still out whether and to what extent the U.S. slowdown observed in Q2 will or may blow over to the euro zone," said Kenneth Broux of Lloyds Banking Group. "I am not convinced that it will this time and see prospects for further outperformance of the core euro zone regions." On Monday, European regulators said seven of 91 European banks failed a health check and need to raise their capital by 3.5 billion euros, far fewer than expected. Thirty-three out of 44 economists who answered extra questions said the stress tests would prompt more capital raising among the 91 banks at large - not just the ones that failed - and by 10 billion euros. More than two-thirds agreed that the worst was over in the European sovereign debt crisis following the conclusion of the tests, although many economists said budget austerity measures have yet to hit economies hard. "We are expecting somewhat slower growth taking into account all the budgetary measures that have been announced recently. And that will imply somewhat slower growth - especially at the level of domestic demand," said Rui Constantino of Banco Santander Totta. A Reuters poll on the G7 economies earlier this month showed euro zone economic growth of 1.1 percent for 2010 and 1.3 percent for 2011 - slower than the equivalent forecasts for Britain and the United States. The big core euro zone economies have been performing well, but some of the smaller peripheral members - many heavily indebted - have been struggling. (C ) Reuters