ECB President Jean-Claude Trichet gave no sign the ECB 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 unorthodox programme of buying mortgage and public sector debt-backed bonds on July 6, Trichet also revealed. He said the bank would lay out more of the details at 4 p.m. British time, adding only 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.

His comments pushed the euro down against the dollar. There was little reaction in bond markets as investors waited to hear the details of the asset purchase plans later.

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.

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 two percent 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."

Lending growth slowed to its slowest pace on record in May data showed this week. Last week's massive cash injection and the bond purchase plans are designed to help the situation.

But ECB policymakers, including Bundesbank President Axel Weber, have begun to talk tough on the issue, raising the prospect that the ECB could bypass the banking channel if they do not pass on the cheaper funding.

Trichet refused to be drawn on exactly how, or when the bank would decide this was necessary

RECORD LOW RUN

The rate decision had been a near certainty. Eighty-one of 82 economists polled by Reuters forecast the ECB would leave the refinancing rate unchanged.

Most analysts currently expect rates to stay at 1 percent for much of next year and they saw no reason to change their call after the news conference.

"We remain happy with our policy rate forecast of continued 1 percent for the next 12 months plus," said Goldman Sachs European economist Erik Nielsen. UniCredit's Aurelio Maccario declared that the ECB was "done with rate cuts."

"They believe that the present policy setting is in line with their medium term objective, and they are pleased with the way last week's one-year repo operation worked," added Nielsen.

Earlier Sweden's central bank surprised markets by cutting its interest rates by a further 25 basis points to 0.25 percent.