European Central Bank says rates won't change until the end of the year

The bolder-than-expected move showed European Central Bank was having to revisit plans to dial back its unprecedented stimulus measures as a global trade war, Brexit uncertainty and simmering debt concerns in Italy take their toll on a fragile eurozone.

Policymakers had not expected to change their guidance on interest rates.

Slumping growth also forced Mario Draghi, the Bank's president, to launch a new scheme to pump cheap funds into eurozone banks, bolstering lenders across the currency area but particularly in recession-struck Italy.

The European Central Bank slashed its growth and inflation forecasts for 2019 and lowered those for 2020 and 2021 on Thursday, acknowledging that Europe's slowdown was longer and deeper than earlier thought. The surprise move caused yields on government bonds to fall and the euro slipped to $1.1244, about 0.6 percent down on the day, after the announcement.

"We are [in] a period of..."

"The persistence of uncertainties related to geopolitical factors, the threat of protectionism and vulnerabilities in emerging markets appears to be leaving marks on economic sentiment", Draghi told journalists in Frankfurt on Thursday.

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Commercial banks have indeed already started restricting credit in the face of falling industrial output and exports, threatening to reinforce the slowdown. That signals the level of concern among Governing Council members, something that's been echoed across other institutions and central banks in recent days.

"These new operations will help to preserve favourable bank lending conditions and the smooth transmission of monetary policy", said Mr Draghi.

The ECB is reverting to stimulus just three months after policy makers chose to end their bond-buying programme and hoped to start weaning the euro-area economy off its crisis-era stimulus.

"A sign of panic or an attempt to get ahead of the curve?", ING economist Carsten Brzeski wrote in a note to clients.

"At the same time, however, it is also a bit of a gamble as any next step from here to tackle a severe downswing of the economy would now require unprecedented measures".

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