ECB president Mr Jean-Claude Trichet has given the clearest hint yet that interest rates could be cut if economic indicators do not improve quickly.
The central bank will reassess its outlook for gradual economic recovery if euro-zone spending fails to pick up, he said in an interview.
Mr Trichet's comments are the latest in a line of statements from ECB board members pointing to recent disappointing economic figures.
But his remarks give the clearest signal yet that the ECB might lower borrowing costs in response.
"We are vigilant and alert," he said in an interview with German business daily Handelsblatt, published yesterday. "In case our expectations for stronger household consumption and overall domestic demand were not to materialise, we would work out our assessment accordingly, fully in line with our monetary policy strategy," he said, when asked about the risks to the ECB's forecast for a gradual pick-up.
His remarks in Handelsblatt were reinforced by Mr Guy Quaden, governor of the Belgian central bank and a member of the ECB's rate-setting council.
Though euro-zone rates, at 2 per cent, are already low, the bank still had room for further reduction, Mr Quaden said.
Earlier this week Mr John Hurley, the governor of the Irish Central Bank, also spoke about the disappointing performance of consumer spending and said that, if it did not pick-up, the economic recovery would remain "unconvincing". He said that the current stance of monetary policy was appropriate, but would be kept under review.
Mr Trichet's comment, however, appeared to indicate more directly the possibility that interest rates could fall. The majority of analysts do not expect a reduction at the next meeting on April 1st, but some now believe that an early reduction could be announced.
Certainly the recent speeches suggest that the ECB could move at later meetings, if economic figures continue to disappoint.
A string of recent economic data have been disappointing, pointing to lagging consumer confidence and a fall in industrial production in the big euro-zone economies.
The next key indicator comes on Friday, with the publication of March's German Ifo business confidence index, which fell sharply in February. The Madrid bombings are also seen as likely to dent confidence.
Market analysts now believe that there is no prospect of a rise in interest rates in the months ahead, with one more reduction possible before the cycle turns upwards. Financial markets are starting to reflect this view and Euro-zone government debt yields - or long-term interest rates - fell to nine-month lows yesterday.
Euribor interest rate futures, a market barometer of euro-zone rate expectations, which were already pricing in a good chance of a cut, now attach a more than 50 per cent probability to a 25 basis points rate cut by June.
