The European Central Bank left interest rates unchanged at record lows on Thursday, holding fire while it assesses the impact of a barrage of measures launched last month to pep up the flagging euro zone economy.
The ECB held its main refinancing rate at 0.15 percent and its deposit rate at -0.10 percent, effectively charging banks for holding their money overnight as it tries to encourage them to lend to small- and medium-sized businesses.
The central bank is waiting to assess the impact of the measures presented last month -- cuts in its rates to record lows, and a series of steps to pump money into the economy -- which it says could take up to a year to take full effect.
"This is as expected," Berenberg Bank Economist Christian Schulz said of the rate decision. "After the rate cut in June, they'll wait a couple of months, probably until the end of the year, to assess the effect that will have."
Markets' attention now shifts to ECB President Mario Draghi's 12:30 GMT news conference.
Investors will be watching for any details of the targeted lending operations -- know as TLTROs -- Draghi announced last month, as well as looking for more clarity on the bank's forward guidance on rates and the status of other potential policy steps.
The measures unveiled last month included extending the duration of unlimited cheap liquidity for banks until the end of 2016, and offering them a TLTRO four-year-loan plan to borrow at a slight premium to regular ECB funding operations.
Pointing to the two steps, Draghi said in a June 21 newspaper interview: "That shows that interest rates will remain low over a longer period."
His message left markets confused as to whether the forward guidance on rates remaining low extends with the unlimited cheap liquidity operations to the end of the 2016, or whether the horizon extends out to the TLTROs' maturity in September 2018.
Banks will be charged a 10 basis point premium over the ECB's main funding operations for the TLTROs, or targeted long-term refinancing operations.
By offering banks the four-year loans at low rates, the ECB hopes to entice banks to lend more freely, particularly to small- and medium-sized companies in the euro zone periphery, but the programme's fine print has not been released yet.
Banks used large parts of the last round of cheap ECB funding in 2011/2012 to buy higher-yielding government bonds and the question is how the ECB will avoid similar behaviour this time and steer the money towards company loans instead.
Clarification on how long the ECB intends to keep interest at low levels will be key for the take-up of the TLTROs, or targeted long-term refinancing operations.
The ECB's decision last month to charge banks for parking their excess money at the central bank overnight has not yet reanimated money markets, but it is helping to keep short-term rates low and steady.
The euro is trading below $1.37, roughly where it was when the ECB met on June 5 but down from over $1.39 before the ECB flagged the cut in May.
The ECB is keeping a close eye on the euro to gauge its impact on inflation, which is running well below its target of just under 2 percent. Euro zone inflation stood at 0.5 percent in June.
Should the outlook for inflation deteriorate, Draghi has said the ECB would consider quantitative easing (QE) -- essentially creating money to buy government or private debt from banks to keep borrowing costs low and boost spending.
Draghi is expected to keep the door open for such steps, but the threshold remains high despite pressure from the International Monetary Fund and the French government to be more aggressive in easing monetary policy to stimulate growth.
"The outlook would need to change materially," Nordea analysts Suvi Kosonen and Jan von Gerich wrote. "It will be late this year, at the earliest, before the ECB has any clearer picture of what its recent easing package can do."