Euro zone interest rates remain “appropriate”, European Central Bank President Jean-Claude Trichet said today, after the bank kept its main refinancing rates at 1.0 per cent for the third month in a row.
Mr Trichet said negative inflation rates were temporary but price developments were likely to remain dampened.
"Current rates remain appropriate," he told reporters at his monthly news conference in Frankfurt. "Economic activity over the remainder of this year is likely to remain weak, although the pace of contraction is clearly slowing down."
His comments are in line with analysts' expectations that they ECB will keep rates unchanged until the end of the third quarter of next year.
"We expect the current episode of extremely low or negative inflation rates to be short-lived and price stability to be maintained over the medium term," said Mr Trichet.
The economy will "remain weak" in 2009 and "after a phase of stabilisation, a gradual recovery with positive quarterly growth rates is expected" next year, he said.
The ECB also kept its overnight deposit rate, which acts as a floor for money markets, at 0.25 per cent and left its marginal lending rate at 1.75 per cent.
The ECB has lowered its rates from 4.25 per cent since October after the financial crisis wreaked havoc in the euro zone economy and inflation risks have subsided.
Euro zone consumer prices are falling and the economy is still shrinking, although some recent data has shown improvement.
Agencies