ECB holds rates at record low, assesses deflation risk

FRANKFURT Thu Feb 6, 2014 7:49am EST

European Central Bank (ECB) President Mario Draghi attends a session at the annual meeting of the World Economic Forum (WEF) in Davos January 24, 2014. REUTERS/Ruben Sprich

European Central Bank (ECB) President Mario Draghi attends a session at the annual meeting of the World Economic Forum (WEF) in Davos January 24, 2014.

Credit: Reuters/Ruben Sprich

FRANKFURT (Reuters) - The European Central Bank 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 percent. It also left unchanged the deposit rate it pays on bank deposits at 0.0 percent, and held its marginal lending facility - or emergency borrowing rate - at 0.75 percent.

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

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

Markets now turn their attention to ECB President Mario Draghi's 1330 GMT (8:30 AM EST) news conference, at which he is expected to repeat the bank's readiness to act in future.

(Writing by Paul Carrel)

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