The European Central Bank left its main policy rates unchanged and said an "ample" degree of monetary stimulus remained necessary even as it boosted its forecasts for growth and inflation.
As expected, the interest rates on the main refinancing operations, the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and negative 0.40% respectively. The ECB said it would maintain net asset purchases at a monthly pace of €30 billion from January until the end of September 2018, or beyond if necessary.
"The governing council expects the key ECB interest rates to remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases," the central bank said.
As the eurozone economy picked up, the ECB decided in October to extend its quantitative easing program by nine months to September 2018 but halve the pace of purchases from €60 billion per month as of the start of 2018. Eurozone growth picked up to an annual 2.5% in the third quarter, but October inflation sank further below the ECB's target, highlighting its dilemma as it seeks to ease the economy off extraordinarily easy monetary policy.
The ECB's staff now predicts economic growth of 2.4% in 2017, and of 2.3% in 2018 and 1.9% in 2019. In September, it had expected expansion of 2.2% this year and 1.8% next year.
Its inflation outlook has also picked up, with prices set to grow by 1.5% this year, and by 1.4% in 2018, before reaching 1.7% in 2020. The September forecasts had estimated inflation at only 1.2% next year, but oil and food prices are now pushing higher.
"The incoming information, including our new staff projections, indicates a strong pace of economic expansion and a significant improvement in the growth outlook," ECB President Mario Draghi said in his prepared introduction to the press conference.
"The strong cyclical momentum and the significant reduction of economic slack give grounds for greater confidence that inflation will converge towards our inflation aim. At the same time, domestic price pressures remain muted overall and have yet to show convincing signs of a sustained upward trend," he said.
"An ample degree of monetary stimulus therefore remains necessary."
The euro fell less than 0.2% to $1.1805 shortly after Draghi began speaking at 2:03 p.m. in London. The retreat in the currency also came after the Federal Reserve raised its target range by 25 basis points on Dec. 13 and projected three more rates rises in 2018.