FRANKFURT : The European Central Bank (ECB) held its key interest rate at an all-time low of 1.0 percent Thursday as the 16-nation eurozone economy showed clear signs of robust health.
Sweden's central bank also left its main lending rate at a record low of 0.25 percent, and issued improved forecasts for the Swedish economy.
ECB president Jean-Claude Trichet was expected to unveil brighter estimates by bank staff for the eurozone economy as well, which expanded in August for the first time since May 2008, a closely-watched survey showed.
The purchasing managers' index (PMI) for the eurozone compiled by data and research group Markit rose to 50.4 points in August -- crossing the 50-point line that indicates business activity returning to growth.
In Paris, the Organisation for Economic Cooperation and Development said the United States and eurozone were on track to pull out of recession in the third quarter of this year but that the outlook beyond was still highly uncertain.
Many economists expect global recovery to be slow and Trichet warned last month the road would probably be a bumpy one.
But new ECB staff forecasts expected to revise the economic outlook upwards "will provide ground to assess the recent improvement in data and gauge the effectiveness of the monetary policy transmission to date," UniCredit analysts said in a research note.
The central bank has slashed its lending rates from a high of 4.25 percent and pumped hundreds of billions of euros (dollars) into the banking system and corporate lending markets to underpin weak activity.
The next interest rate movement is likely to be an increase as the economy recovers, but analysts do not expect that before well into 2010 at the earliest.
They also do not think the ECB will reverse other policy measures any time soon.
A Natixis research note said that "a tightening should not occur before mid-2011" because inflation would remain tame and growth uncertain in the near future.
Trichet's press conference that follows rate decisions "should reflect some cautious optimism but yet point that exit strategies currently are not on the ECB's radar screen," UniCredit analysts said.
The eurozone economy was last forecast to contract by 4.6 percent this year and to shrink by a further 0.3 percent in 2010.
The entire 16-nation economy contracted by just 0.1 percent in the second quarter of 2009 owing mainly to lower investment, a big improvement nonetheless from the record 2.5 percent drop in the first three months of the year.
Previous inflation estimates of 0.3 percent for this year and 1.0 percent in 2010 are believed less likely to see major changes however.
The main hurdles to a strong eurozone rebound are jobless rolls that hit a 10-year high in July of more than 15 million people and a potential credit squeeze that could choke off a sustained economic recovery.
The OECD report said: "Numerous headwinds imply that the pace of the recovery is likely to be modest for some time to come."
German Economy Minister Karl-Theodor zu Guttenberg unveiled on Tuesday a 17.5-billion-euro (25-billion-dollar) proposal to ease tight credit by lending directly to businesses and backing up credit insurers.
"We want to ensure that small- and medium-sized companies in particular can gain access to enough credit, even in economically difficult times," he said.
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