LONDON Oct 31 (Reuters) - Stubbornly high euro zone inflation data on Monday reinforced money market bets that the European Central Bank will wait until December to cut interest rates, although there is an outside chance it will move on Thursday.

Consumer price inflation in the 17-nation euro zone stayed at 3.0 percent in October -- above the bank's target of close to, but below, 2 percent, and topping forecasts of 2.9 percent, data showed.

Thursday's monetary policy meeting will be the first under the presidency of Mario Draghi, who takes over at the helm of the ECB on Tuesday from Jean-Claude Trichet.

Draghi may be reluctant to reduce interest rates right off the bat as he seeks to prove he will maintain the bank's price stability mandate, analysts say.

"Cutting rates on Thursday could be seen as being too dovish and not establishing one's credentials as an inflation fighter early on, but alternatively one could say it shows leadership and (that he is) doing the right thing at the right time," Simon Smith, chief economist at FxPro, said.

"It's one of those difficult calls because we've entered unknown territory."

That uncertainty was reflected in Eonia markets, with analyst expectations for rate cuts this year ranging widely.

Eonia forwards are pricing in a 5 to 50 percent chance of a 25 basis point rate cut in November and a 60 to 100 percent chance of monetary easing in December, analysts said.

Excess liquidity in the financial system has made it increasingly difficult to use Eonia markets as a gauge of interest rate expectations but the predictions chimed with a Reuters poll of economists.

Around two thirds of 70 economists polled by Reuters last week predicted a rate cut by December and 11 said it would happen on Nov 3.

"Part of the money that is borrowed from the central bank then is (put) in the overnight deposit ... so the banking system is not really using the liquidity to lend money to corporates, to other banks. I don't expect a cut will help the credit conditions in the euro area," Alessandro Giansanti, strategist at ING, said.

FINANCIAL STRESS

Euro zone interbank lending rates fixed around their highest since early August as banks continued to charge a high premium to lend to each other.

The benchmark three-month euro Libor rate was at 1.52688 percent, unchanged from the previous trading session.

Key measures of financial stress rose as a euro zone deal last week to tackle the debt crisis -- including an agreement on the extent of banks' recapitalisation needs -- did little to soothe investor concerns over the vulnerability of the region's banking system.

The spread between three-month euro Libor rates and overnight indexed swap rates rose to 72 basis points from 70 bps in the previous trading session.

The U.S. equivalent was up at 34 bps from 33 bps.

While banks in the European Union were told last week they need to raise around 106 billion euros in fresh capital by the end of June next year to help accommodate losses on sovereign debt issued by the region's struggling peripheral states, some strategists said the plan fell short of addressing the crisis of confidence in the sector.

As Societe Generale said in research note, "increasingly, short-term funding is provided by the ECB, whereas trust among banks is so low that most of those funds are then left as a deposit with the ECB."

Indeed, banks parked 248 billion euros at the central bank overnight, the highest level in two weeks, while the use of the ECB's emergency overnight lending facility remained elevated at 2.9 billion euros, figures on Monday showed.

The ECB lent banks 182.77 billion euros in a weekly operation.

"There is no magic bullet that could resolve things for the euro zone banks in the short term," Smith said, adding he expected the current financial market stress to persist at least until the end of the year.

"Even bank recapitalisation has to come from somewhere, be it the private sector or some sort of government measure or a combination thereof. Even those have consequences and costs to the capital market as a whole."