The European Central Bank left interest rates unchanged at its meeting on Thursday, bringing an end to a series of hikes that started in July last year.

Policymakers had raised rates at each of their last 10 meetings as they sought to rein in soaring inflation driven in large part by surging energy prices in the wake of Russia's invasion of Ukraine.

Inflation was still set to remain "too high for too long", the ECB said in a statement, while noting that the headline rate had dropped and that underlying price pressures "continued to ease".

Having hit double-digit highs at the end of last year, eurozone inflation sat at 4.3 percent in September.

While the figure is still more than twice the ECB's target of two percent, rising borrowing costs have also shown signs of dampening economic activity in the currency bloc.

The ECB's past moves were being "transmitted forcefully into financing conditions".

"This is increasingly dampening demand and thereby helps push down inflation," the ECB said.

The decision to stand pat at Thursday's meeting -- held exceptionally in Athens -- leaves the ECB's key deposit rate at four percent.

The ECB's long series of hikes has seen borrowing costs rise further and faster than ever before, lifting rates out of negative territory to their highest mark in the history of the Frankfurt-based central bank.

- 'Clear impact' -

Rising borrowing costs have shown signs of weighing on the economy in the eurozone.

The ECB recently revised down its growth projection for the eurozone in 2023 to a meek 0.7 percent, while the outbreak of the conflict in the Middle East has further clouded the horizon.

The 26 members of the ECB's governing council would not "seriously" have thought about raising rates again "amid rising uncertainty over the global outlook", Pictet analyst Frederik Ducrozet said ahead of Thursday's meeting.

The central bank was in "watch and see" mode, Ducrozet said, with new official forecasts only set to be published at the governing council's next meeting in December.

Most recently released economic data has given the impression of a eurozone economy in fragile health.

Business activity in the bloc slumped in October, according to a closely watched Purchasing Managers' Index (PMI) survey put out by S&P Global, raising the possibility of a mild recession in the second half of 2023.

Eurozone banks have been tightening their lending criteria for households and businesses, according to the ECB's own survey of financial institutions published this week.

- Pause or plateau? -

"Weaker economic conditions and higher interest rates are having a clear impact", said ING economist Bert Colijn.

The borrowing squeeze was a good reason not to hike further, he suggested, "especially given the fact that the ECB itself only expects the biggest impact of higher rates in early 2024".

ECB President Christine Lagarde has previously acknowledged the "pain" felt by consumers as a result of aggressive rate hikes, but has cautioned against relenting too soon.

While inflation has come down, the ECB does not expect it to return to the target of two percent before 2025, according to its most recent projections in September.

Holding rates at their current levels could constitute a temporary "pause", said Jack Allen-Reynolds of Capital Economics, but there was every chance of the pause becoming a "plateau".

The question now, according to Pictet analyst Ducrozet, was "how long policy rates should be kept at current levels".