The European Central Bank left interest rates at 4.25 per cent today, and President Jean-Claude Trichet said it would not get euro zone inflation back on target until 2010.
The ECB also published forecasts by its staff showing higher inflation than previously expected, and lower economic growth for this year and next.
However, Mr Trichet said the ECB's outlook for monetary policy and the economy had not changed significantly since last month.
"We will deliver price stability during the course of 2010 - I don't want to be more precise," he told his monthly news conference.
Euro zone inflation eased only slightly in August to 3.8 per cent from the record 4.0 per cent reached in June and July, and remains around double the ECB's medium-term price stability target of just below 2 per cent.
Mr Trichet said the 21-member Governing Council had been unanimous in its decision to keep rates on hold, and that it had "no bias" on future rate moves, echoing last month's language.
"We do not have any bias - we just increased interest rates (in July), and we increased interest rates precisely to be sure that we are taking into account the risks that we see," he said. "Simultaneously we never precommit and we always do what is necessary to maintain price stability."
Risks to inflation were to the upside, while growth risks pointed downwards, Mr Trichet said.
Nonetheless, Mr Trichet did not see broad-based second-round inflation effects in the euro zone nor did he see the risk of a recession in the ECB's staff economic forecasts, which are not formally endorsed by the Governing Council.
The ECB is particularly nervous about over-generous wage deals as European trade unions seek pay increases which are well above inflation for workers to compensate for recent jumps in living costs.
New ECB staff projections put euro zone inflation for 2009 in a 2.3-2.9 per cent range, increasing the midpoint to 2.6 per cent. For this year, it gave a 3.4-3.6 per cent range, giving a 3.5 per cent midpoint.
Growth in the euro zone was seen at 1.1-1.7 per cent, for a midpoint of 1.4 per cent, in 2008 and 0.6-1.8 percent in 2009, for a 1.2 per cent midpoint.
Three months ago, the ECB staff projected a 3.4 per cent midpoint for inflation in 2008 and 2.4 per cent for 2009. They had predicted economic growth of about 1.8 per cent this year and 1.5 per cent in 2009. The projections are based on market expectations of future interest rates and oil prices.
The euro weakened against the dollar after Trichet gave his growth outlook, and September Bund futures rose after he said economic uncertainty was "particularly high".
In early New York trading, the euro fell 0.1 percent on the day against the dollar to trade at $1.4468, pulling back from $1.4480 before Mr Trichet's comments.
The dollar was down against the yen at 108.11 yen, off 0.2 per cent.
Sterling rose 0.5 per cent to $1.7824, benefiting from a "relief rally" after the BoE decision to leave interest rates unchanged at 5.0 per cent. Some investors had positioned for a BoE cut. The euro was down 0.5 per cent at 81.22 pence sterling.
Earlier today Sweden's Riksbank - which like the ECB has bucked the trend of looser monetary policy since last year's credit crunch - raised rates by a quarter percentage point to 4.75 per cent. However, the Bank of England kept British rates at 5.0 per cent.
Data released today showed that industrial production in Germany, the euro zone's biggest economy, fell by an unexpectedly sharp 1.7 per cent in July, continuing a pattern of bleak news on growth.
The Organisation for Economic Cooperation and Development (OECD) chopped its 2008 growth forecast for the 15 nation euro zone earlier this week to 1.3 per cent from 1.7 per cent. The region suffered its first ever quarterly contraction in April, May and June.