FRANKFURT (AFP) ― The European Central Bank held its key rates unchanged, as widely expected, at a policy meeting here Thursday, but ECB chief Mario Draghi insisted the bank stood “ready to act” to give the eurozone’s economy a much-needed shot in the arm.

With the euro area still mired in its longest recession ever, the ECB’s governing council voted to keep the bank’s key “refi” refinancing rate steady at an all-time low of 0.5 percent, after cutting it by a quarter of a percentage point last month.

The central bank also left its other two rates ― the deposit rate and the marginal lending rate ― at zero percent and 1.0 percent respectively.

Given the proximity of last month’s cut, no analysts or ECB watchers had been expecting the central bank to announce any further policy moves this month. 

ECB experts have questioned the effectiveness of rate cuts, arguing that the more pressing issue for the euro area’s economy, hit also by widespread unemployment, is the low level of lending to Europe’s small and medium-sized enterprises.

Last month, Draghi revealed that the ECB was in “consultations” on this issue with other European institutions such as the European Investment Bank and the EU Commission.

But he acknowledged that the ECB’s thinking on the issue was “very much at an early stage.”

And Draghi was no more forthcoming on details this month.

One of the main focuses of the meeting was the publication of the ECB’s latest growth and inflation forecasts for the 17 countries that share the euro.

The ECB said the eurozone economy was now projected to shrink by 0.6 percent this year and then grow by 1.1 percent next year, whereas in March, it had been pencilling in a contraction of 0.5 percent for 2013 and growth of 1.0 percent for 2014.

“Incoming information has confirmed our assessment which led to the cut in interest rates in early May,” Draghi explained.

Underlying price pressures were expected to remain subdued over the medium term and inflation was expected to remain within the ECB’s definition of price stability, which is an inflation rate below, but close to, 2.0 percent.

“Against this overall background, our monetary policy stance will remain accommodative for as long as necessary,” Draghi said.

“In the period ahead, we will monitor very closely all incoming information on economic and monetary developments and assess any impact on the outlook for price stability,” and the ECB “remains ready to act” if necessary, he insisted.

Ernst & Young Eurozone Forecast economist, Marie Diron, said the ECB’s forecast was “very much in line with ours: 2013 looks like it will be no better than 2012, but at least it should mark the bottom of this cycle with some timid growth expected for next year.”

Diron noted that “the measures hinted at last month to revive securities markets in order to foster loans to SMEs have not been finalized yet.

“And it looks like it will be some months still before we hear about specific implementation plans. This is disappointing,” she said.

Credit constraints in parts of the eurozone were among the main factors preventing a return to growth.

“The ECB needs to intervene to ensure that its very accommodative monetary policy reaches the real economy,” she said.

Berenberg Bank’s Rob Wood said the expected recovery in growth later this year and signs of improving confidence “kept the ECB on hold today.”

“In our view, if the economy performs as expected with a gradual return to modest growth later this year, and inflation bottoms out, then no further ECB action is likely,” the expert said.

“But a further cut in the refinancing rate could become likely if the data were to unexpectedly weaken again,” he suggested.

Howard Archer at IHS Global Insight felt that Draghi “sounded a little more upbeat compared to a month ago.”

“Nevertheless, the ECB is keeping the door open to a further interest rate cut and also to further non-standard measures to support eurozone economic activity should recent signs of improving survey evidence from a low base not be sustained,” he said.