The European Central Bank kept euro zone interest rates at 1% today, bolstering expectations they will stay there well into next year, and said it would start buying bonds next week.
ECB President Jean-Claude Trichet gave no sign that the bank was planning to move rates from the current record low level soon, saying they remained 'appropriate'.
However, he continued to keep the door open for further cuts if needed.
The ECB will begin its programme of buying mortgage and public sector debt-backed bonds on July 6, Trichet also revealed. He said that bonds with maturities of between 3 and 10 years would be targeted.
Appearing to push back timing of a recovery, Trichet said economic activity would remain weak for the rest of the year.
Although recent data suggested the breakneck pace of decline may be slowing, stabilisation of the economy would begin only next year, he added.
In line with economists' expectations, Trichet said the ECB saw no need for additional unconventional moves to stimulate the euro zone economy at present.
'We had not envisaged any new, other measure or operation. We consider that what we do now is appropriate,' he said.
Trichet dismisses threat of deflation in euro zone
Despite figures this week showing euro zone prices are now falling, he dismissed the likelihood of serious deflation. He also played down the chance that inflation could quickly rise above the ECB's 2% ceiling.
'We expect the current episode of extremely low or negative inflation rates to be shortlived and price stability to be maintained over the medium term,' he said.
Trichet hailed last week's near-half trillion euro injection of ultra cheap 1-year funds as a success. But he acknowledged that the ECB needed to keep an eye on whether commercial banks passed on the cheaper financing to firms and consumers.
'We are very closely observing what is going on, but we saw today no reason to change the concept,' he said.
'Our call to commercial banks in general is to be up to their responsibility, namely to ship to the real economy the extraordinary efforts which we are doing.'
Today's rate decision had been a near certainty. 81 out of 82 economists polled had forecast that the ECB would leave the refinancing rate unchanged.
Most analysts currently expect rates to stay at 1% for much of next year and they saw no reason to change their call after the news conference.
Earlier Sweden's central bank surprised markets by cutting its interest rates by a further 25 percentage points to 0.25%.
