The European Central Bank is expected to keep interest rates on hold at a record low on Thursday as it waits to see the impact of efforts so far to revive the economy and credit flows.

All 75 economists in a Reuters poll last week expected the ECB to keep the main policy rate at 1.0 percent for the third month in a row, where the refi is likely to remain for at least another year.

Massive supplies of liquidity have pushed short-term bank-to-bank rates down below this level, and analysts said the ECB was unlikely to announce any plans to ease back on the throttle with the euro zone economy still shaky.

The ECB is feeling its way and will keep a steady-hand policy, UniCredit economist Andreas Rees said.

This would leave euro zone interest rates as the highest among the biggest developed economies. The Bank of England, also meeting on Thursday, is tipped to leave British rates at 0.5 percent.

The ECB's 22-member Governing Council started its meeting on schedule at 3 a.m. EDT and the rate decision is due at 7:45 a.m. EDT.

At its July policy meeting, the ECB said it expected economic activity to remain weak for the rest of the year, although the pace of decline was likely to ease from the 2.5 percent plunge recorded in the first quarter.

ECB President Jean-Claude Trichet was likely to stick to a similar assessment at his news conference beginning at 8:30 a.m. EDT, Deutsche Bank economist Mark Wall said.

The big flags within the language like the appropriate level of rates, the balanced risks (to inflation and growth) -- I think they will be maintained, he said.


Trichet is, however, expected to give details on the first month of the ECB's covered bond program and the market's reaction. After a slow start, the ECB has bought close to 5 billion euros in bonds backed by mortgage and public sector assets -- putting spending on track as it plans to use 60 billion over 12 months.

Dresdner Kleinwort bond analyst Ted Packmohr said the market was keen for information about spending country-by-country, the share of purchases on the primary market as opposed to the secondary market, and the maturities bought. The ECB has said it will focus on maturities of three to 10 years.

The more information they provide, the better it would be, he said.

Trichet may also outline the results of the ECB's survey of professional forecasters, due to be released next week, and the ECB's view of bank lending.

Corporate lending fell sharply in June, while banks tightened credit standards again in the second quarter of the year and expect to tighten further in the third quarter, but at a slower pace.

The ECB has repeatedly urged banks to lend on the close to half a trillion euros in one-year funds they borrowed from the ECB in late June, as a revival in bank lending is key to supporting the real economy.

Economic signals are mixed: surveys of purchasing managers suggest the recession in the services and manufacturing sectors eased in July, and economic sentiment rose to an eight-month high.

But euro zone unemployment is at record levels and retail sales fell again in June, underlying the weakness in consumer demand.

Most of what we have seen as positive is surveys, as opposed to hard data, so I doubt they will be rushing to make big changes to any conclusions, said Deutsche's Wall, especially as new ECB staff projections are due next month.

Meanwhile, inflation is likely to remain well below the ECB's benchmark of below, but close to 2 percent well into next year. Prices at factory gates logged their biggest annual drop on record in June and consumer prices fell for the second month running in July, by a record 0.6 percent annually.

In June, ECB staff forecast the economy would contract about 4.6 percent this year and 0.3 percent in 2010, although positive growth is expected to return mid-year. Staff forecast inflation of about 0.3 percent this year and 1.0 percent in 2010.

(Reporting by Krista Hughes; editing by David Stamp)