The ECB also published forecasts by its staff showing higher inflation than previously expected, and lower economic growth for this year and next. However, Trichet said the ECB's outlook for monetary policy and the economy had not changed significantly since last month.

"We will deliver price stability during the course of 2010 -- I don't want to be more precise," he told his monthly news conference.

Euro zone inflation eased only slightly in August to 3.8 percent from the record 4.0 percent reached in June and July, and remains around double the ECB's medium-term price stability target of just below 2 percent.

Trichet said the 21-member Governing Council had been unanimous in its decision to keep rates on hold, and that it had "no bias" on future rate moves, echoing last month's language.

"We do not have any bias -- we just increased interest rates (in July), and we increased interest rates precisely to be sure that we are taking into account the risks that we see," he said. "Simultaneously we never precommit and we always do what is necessary to maintain price stability."

Risks to inflation were to the upside, while growth risks pointed downwards, Trichet said.

Nonetheless, Trichet did not see broad-based second-round inflation effects in the euro zone nor did he see the risk of a recession in the ECB's staff economic forecasts, which are not formally endorsed by the Governing Council.

The ECB is particularly nervous about over-generous wage deals as European trade unions seek pay increases which are well above inflation for workers to compensate for recent jumps in living costs.

New ECB staff projections put euro zone inflation for 2009 in a 2.3-2.9 percent range, increasing the midpoint to 2.6 percent. For this year, it gave a 3.4-3.6 percent range, giving a 3.5 percent midpoint.

Growth in the euro zone was seen at 1.1-1.7 percent, for a midpoint of 1.4 percent, in 2008 and 0.6-1.8 percent in 2009, for a 1.2 percent midpoint.

Three months ago, the ECB staff projected a 3.4 percent midpoint for inflation in 2008 and 2.4 percent for 2009. They had predicted economic growth of about 1.8 percent this year and 1.5 percent in 2009. The projections are based on market expectations of future interest rates and oil prices.

RATE HOLD EXPECTED

All 83 economists polled by Reuters before Thursday's meeting of the Governing Council had expected rates to stay on hold in the absence of any clear signal from the ECB that it was considering a change.

"Trichet has tried to accommodate the recently weaker data, revising down expectations on growth, but inflation fears persist. The comments are very much in line with the steady rate policy that has been maintained today," said BNP Paribas's head of interest rate strategy, Cyril Beuzit.

"He has been a bit less hawkish, and we see Bunds holding onto the current session gains," Beuzit added.

The euro weakened against the dollar after Trichet gave his growth outlook, and September Bund futures rose after he said economic uncertainty was "particularly high".

Earlier on Thursday Sweden's Riksbank -- which like the ECB has bucked the trend of looser monetary policy since last year's credit crunch -- raised rates by a quarter percentage point to 4.75 percent. However, the Bank of England kept British rates at 5.0 percent.

Data released on Thursday showed that industrial production in Germany, the euro zone's biggest economy, fell by an unexpectedly sharp 1.7 percent in July, continuing a pattern of bleak news on growth.

The Organisation for Economic Cooperation and Development (OECD) chopped its 2008 growth forecast for the 15 nation euro zone earlier this week to 1.3 percent from 1.7 percent. The region suffered its first ever quarterly contraction in April, May and June.

(Writing by David Milliken; editing by David Stamp)