The European Central Bank kept its benchmark interest rate at a record low of 1 per cent today after first signs of an economic recovery emerged.
The Frankfurt-based ECB will also reveal details of its asset-purchase plan later this afternoon. Economists say it is unlikely to signal it will buy more than the €60 billion of covered bonds already announced.
At a press conference following the decision, ECB president Jean-Claude Trichet said the ECB had lowered its economic forecasts for this year and next year, mainly because of a very weak first quarter. However he said activity over the remainder of this year would "decline at much less negative rates."
He said he expected positive quarterly growth rates by the middle of next year.
He predicted that annual inflation rates would decline further and temporarily remain negative over the coming months, before returning to positive territory by the end of 2009.
"To sum up, the current key ECB interest rates are appropriate taking into account our decisions of early May, including the enhanced credit support measures, and all the information and analyses which have become available since then," he said.
The ECB also kept its overnight deposit rate, which is acting as a floor for money markets, at 0.25 per cent, and left its marginal lending rate at 1.75 percent.
Euro zone inflation is low and the economy is shrinking fast, although some data have shown signs of improvement.
Agencies