Euro zone government bond yields were mixed on Thursday after the European Central Bank decided on a widely expected 25 basis points interest rate cut and tweaked its economic forecasts.

The ECB cut interest rates again as inflation slows and economic growth falters, but provided almost no clues to its next step as investors bet on steady policy easing.

"The central bank changed its economic forecasts marginally. We still expect another rate cut in December," said Massimiliano Maxia, fixed income specialist at Allianz Global Investors.

The bloc’s borrowing costs dropped on Wednesday, tracking moves in U.S. Treasuries after data showed U.S. underlying inflation remained sticky, curbing expectations for a significant interest rate cut by the Federal Reserve next week.

German 10-year Bund yields were up 1.5 basis points at 2.114% -- roughly unchanged from before the ECB statement -- after falling 5 bps the day before.

It reached 2.086% on Wednesday, its lowest since the market turmoil of early August.

Some analysts speculated that if ECB President Christine Lagarde emphasizes the importance of quarterly projections, the likelihood of a rate cut in October – currently estimated at around 40% by the markets - would diminish.

Money markets priced in 35 bps of monetary easing by year-end -- from 35 bps before the ECB statement -- which implies one 25 bps move and a 40% chance of a further cut. The deposit facility rate is at 3.50%.

There is a prevailing view among analysts that the ECB will implement a 25 bps easing move every quarter, contingent on the release of new economic forecasts, which means one rate cut in December.

Germany's 2-year Schatz yields were up 4 bps at 2.17%. They were at 2.18% before the ECB.

Their premium over 10-year debt was at 7 bps from 6.8 bps before the central bank statement. The day before it hit 2.6 bps, its narrowest since November 2022.

Italian 10-year yields, which on Wednesday fell to their lowest since August 2022, were down 2 bps at 3.51%, leaving their premium over Bunds at 140.5 bps.

They were at 3.53% before the ECB statement, with the premium over Bunds at 140 bps.

(Reporting by Stefano Rebaudo; Editing by Alexander Smith)