The European Central Bank now expects its interest rates to remain unchanged for a longer period than forecast earlier as downside risks to the euro area outlook intensify amid escalating global trade tensions.

The Governing Council, led by ECB President Mario Draghi, left the key interest rates unchanged after the policy session in the Lithuanian capital of Vilnius, as expected.

The main refi rate is currently at a record low zero percent and the deposit rate at -0.40 percent. The marginal lending facility rate is at 0.25 percent.

Eurozone interest rates were raised last in July 2011 by 25 basis points.

The bank changed its forward guidance to reflect that it expects any change to the interest rate only after the first half of next year. Earlier, the bank expected rates to remain unchanged at least through the end of this year. "The Governing Council now expects the key ECB interest rates to remain at their present levels at least through the first half of 2020, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2 percent over the medium term," the bank said. A mild change to the forward guidance in March had suggested that the bank expects the first interest rate hike since the financial crisis to take place in 2020. The latest wording has clarified the message. The ECB reiterated that it will continue to reinvesting the proceeds from maturing securities that it had acquired under its asset purchase programme.

The bank unveiled the terms of its latest targeted longer-term refinancing operations, or TLTRO-III, announced in March. The Governing Council priced these longer term loans 10 basis points above the average rate in the main refinancing operations. "For banks whose eligible net lending exceeds a benchmark, the rate applied in TLTRO III will be lower and can be as low as the average interest rate on the deposit facility prevailing over the life of the operation plus 10 basis points," the ECB said. The TLTRO-III is set to start in September this year and end in March 2021, thus with a maturity of two years.

The Governing Council, which is held its June policy session in the Lithuanian capital Vilnius, will have Philip Lane on board as the new ECB Chief Economist.

Lane has been dealt with a challenge, as soon as he started in the new job, in the form of a sharp slowdown in the euro area inflation.

Both headline inflation at 1.2 percent and core price growth at 0.8 percent in May are distant from the ECB's target of "below, but close to 2 percent. The doubling of the quarterly growth rate to 0.4 percent in the first quarter, further easing in the jobless rate and a strengthening in economic sentiment should have comforted ECB policymakers slightly, boosting their hopes that inflation is on track to hit the target.

However, risks from the intensifying trade tensions and the Brexit uncertainty are likely to keep them on their toes. On the domestic front, there are reasons for concern such as a slowdown in manufacturing and weakening consumption, other than the slowing inflation that signal slower growth in the second quarter.

Figures released earlier on Thursday confirmed that the quarterly growth rate doubled to 0.4 percent in the first three month of the year. Markets now expect the ECB to launch more stimulus this year and a much  speculated measure is a tiered deposit rate that can partly reduce the burden of the cost banks pay on the cash they park at the ECB.

However, ECB policymakers are wary of a tiered deposit rate as they fear it could signal that interest rates are going to remain low for a long time.

Draghi is set to present the latest set of macroeconomic projections from the ECB staff following the policy announcement and some economists expect further downgrade to the Eurozone growth and inflation outlook.

Draghi will hold his customary post-decision press conference at 8.30 am ET.

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