European Central Bank holds rates at record low, assesses deflation risk

FRANKFURT (REUTERS) - The European Central Bank (ECB) left interest rates unchanged on Thursday, holding off fresh policy action to combat the threat of deflation while it waits for new staff forecasts next month.

The decision to leave rates on hold was expected by most economists as the bank awaits updated economic projections from its staff next month. A downward revision to the inflation outlook then could prompt a policy move.

The ECB held its main interest rates at 0.25 per cent. It also left unchanged the deposit rate it pays on bank deposits at 0.0 per cent, and held its marginal lending facility - or emergency borrowing rate - at 0.75 per cent.

The central bank cut rates last November after euro zone inflation tumbled to 0.7 per cent in October. Inflation again slowed to 0.7 per cent in January, making next month's new forecasts of crucial importance.

The ECB targets inflation of just below 2 per cent and is wary of it getting stuck in a "danger zone" below 1 per cent.