ECB keeps rates on hold, leaves options open for Sept

FRANKFURT (Reuters) - The European Central Bank kept borrowing costs on hold on Thursday, repeating that it needed to see more evidence that inflation was heading back to its goal before lowering interest rates further.

With the worst bout of inflation in a generation now largely behind it, the ECB began lowering rates last month and is expected to continue doing so in a gradual way through to the end of next year at least.

But the euro zone's central bank once more stressed that further easing would depend on incoming data and particularly on domestic inflation, where progress has been slow in recent months.

"The incoming information broadly supports the Governing Council's previous assessment of the medium-term inflation outlook," the ECB said.

Thursday's decision leaves the rate that the ECB pays on bank deposits at 3.75%. Banks can continue to borrow at the central bank's weekly and daily cash auctions for 4.25% and 4.50%, respectively.

ECB President Christine Lagarde will be certain to face questions about the future path for rates at a news conference due to start at 1245 GMT.

She is also likely to be asked whether France would qualify for ECB help in a scenario in which fiscal and political turmoil upsets its bondholders.

(Reporting By Francesco Canepa; Editing by Catherine Evans)

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