Second-round inflation fears prompted ECB action - Draghi

FRANKFURT (Reuters) - The European Central Bank cut interest rates and increased its asset-buying programme in order to stop exceptionally lower inflation from leaking into the overall economy, ECB President Mario Draghi said on Thursday.

"It is crucial to avoid second-round effects," he told a news conference, referring to price falls extending beyond headline products such as oil.

The ECB said it now expected 2016 euro zone inflation to be 0.1 percent, well down from its previous forecast of 1.0 percent.

Draghi also said the bank intended to keep interest rates low or even lower for an extended period of time.

Earlier, the ECB surprised financial markets by dropping its main refinancing rate to zero from 0.05 percent.

It also expanded its quantitative easing asset-buying programme to 80 billion euros a month from 60 billion euros and cut its deposit rate to -0.4 percent from -0.3 percent, charging banks more to keep their money with the ECB.

(Reporting by Balazs Koranyi Editing by Jeremy Gaunt.)