* C.bank holds rates at 4 percent after series of cuts
* Economy likely grew sluggishly in Q2, Q3 -cbank
* Inflation inched up to 2.8 pct in August
By Benet Koleka
TIRANA, Sept 26 (Reuters) - Albania's central bank kept interest rates on hold at a decade-long low of 4 percent on Wednesday, steering a course between trying to revive a sluggish economy and keeping a lid on rising inflation.
The bank has cut interest rates five times since September, by 25 basis points on each occasion and the last time in July, as it sought to revive growth in one of Europe's poorest states. It held borrowing costs in August.
Albania's economy has expanded around 6 percent a year over the last decade, but growth rates have plummeted since the debt crisis hit neighbouring Greece and Italy.
The two euro zone strugglers are Albania's main trade partners and home to a million-strong migrant community, whose remittances have also dropped, depressing domestic demand.
Central bank governor Ardian Fullani said the economy likely grew modestly in the second and third quarters after contracting 0.2 percent in the first.
But annual inflation rose in August to 2.8 percent, up 0.1 percent from July, mainly due to high prices of imported fuel and foods, creeping closer to the bank's 3 percent target.
Fullani also said the central bank wanted to wait for the impact of the recent series of cuts to take fuller effect before any further policy shifts.
Late last year the government targeted GDP growth of 4.3 percent for 2012, compared with a forecast of only 0.5 percent by the International Monetary Fund. (Reporting By Benet Koleka, Editing by John Stonestreet)