ECB keeps rates unchanged as economy hums along despite trade strife

FLORENCE, Italy (Reuters) -The European Central Bank kept interest rates unchanged at 2% in a well-telegraphed decision on Thursday, offering no clues about its next move, even as investors keep betting that one final cut may be on the agenda in the coming months.

The ECB has kept rates steady since June after halving them over the course of a year, and has said it is in a "good place" with inflation at target and economic growth near its potential - a rare success for a central bank that has missed its objective for most of the past decade.

The bank also repeated its long-standing pledge that incoming data will guide policy moves and that it will not pre-commit, keeping all options on the table.

"Inflation remains close to the 2% medium-term target and the Governing Council’s assessment of the inflation outlook is broadly unchanged," the ECB said in a statement. "The economy has continued to grow despite the challenging global environment."

Economic data has been by and large consistent with the bank's last projections, making Thursday's decision a foregone conclusion.

Business activity has picked up, sentiment in Germany, the euro zone's biggest economy, is improving, and firms are becoming more optimistic, partly because the fog over tariffs is starting to lift.

On the other hand, industry continues to suffer, exports to the United States are down sharply and there is growing evidence that China is dumping goods it cannot sell in the U.S. on European markets.

"The robust labour market, solid private sector balance sheets and the Governing Council’s past interest rate cuts remain important sources of resilience," the ECB added. "However, the outlook is still uncertain, owing particularly to ongoing global trade disputes and geopolitical tensions."

Some policymakers nevertheless see a greater risk of lower growth and inflation, a case for easing policy further. Financial investors also share these misgivings and are pricing in a 40% to 50% chance of another rate cut by next summer.

But policy hawks argue that greater spending by Germany on defence and infrastructure changes the outlook fundamentally, and will push up growth and prices even without further ECB action.

Attention now turns to ECB President Christine Lagarde's 1345 GMT news conference.

(Reporting by Balazs Koranyi; Editing by Catherine Evans)

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