Frankfurt - The European Central Bank (ECB) is set to leave its benchmark refinancing rate on hold at 4.25 per cent Thursday, analysts predict, as it faces up to the twin economic threats of surging inflation and slumping growth.

This comes after firing off a warning shot at its meeting at the start of July to ward off resurgent inflation by lifting borrowing costs in the 15-member eurozone by 25 basis points.

But since then while signs have emerged of a pickup in inflation, the economic gloom surrounding the eurozone is starting to deepen as new grim economic numbers continue to roll in.

At 4.1 per cent, inflation in the eurozone is more than double the ECB's target of "close to, but just below 2 per cent."

The question now facing financial markets is how hawkish the ECB is likely to be on Thursday about the threats posed by renewed inflationary pressures.

The result will be that ECB chief Jean-Claude Trichet's comments at his regular press conference Thursday for hints as to how the bank's 21-head rate-setting council sees both monetary policy and the world economy developing in the coming months. (dpa)