-0.3°C Not observed 
BERLIN - The European Central Bank raised its growth projections for the 16-nation eurozone on Thursday, but stressed that the outlook remains uncertain and said its effort to keep banks supplied with credit would stay in place for the rest of the year.
The ECB left its benchmark refinancing rate at a record low of one per cent for the 16th consecutive month, a move that was universally expected, and offered no indication that it might rise any time soon.
"We are very anxious not to create abnormal expectations," Bank President Jean-Claude Trichet said after a strong performance by export-fueled Germany led the eurozone to second-quarter growth of one per cent compared with the previous three months.
"We have very good results in the last quarter but we do not say that it is victory," Trichet said at a news conference following the ECB governing council meeting in Frankfurt.
Trichet said recent economic indicators were better than expected, although they confirm expectations of "a moderation in the second half."
"Looking ahead, the recovery should proceed at a moderate pace with uncertainty still prevailing," he said.
Trichet said the ECB is now projecting growth this year of 1.4 to 1.8 per cent — a range that centres on 1.6 per cent, up from the one per cent forecast in June.
Its forecast for 2011 was for growth between 0.5 and 2.3 per cent. That range centres on 1.4 per cent, up from the previous 1.2 per cent.
The ECB believes that "the risks to this improved economic outlook are slightly tilted to the downside," Trichet said, citing concerns about the possibility of renewed market tensions and uncertainty about growth prospects outside the eurozone.
Reflecting the ECB's desire to keep money flowing to the banking system in the aftermath of the government debt crisis, Trichet said it would stage three-month, fixed-rate tender operations in October, November and December.
He also said it would continue conducting one-week and one-month unlimited funding operations at least through Jan. 18.
Trichet didn't offer any hints as to when the ECB might end the program to buy up government bonds, which it launched at the height of the crisis earlier this year but has been close to dormant recently.
"Liquidity provision will remain ample, a next exit attempt will at the earliest only start in the first quarter of next year and rate hikes are still a distant future," said Carsten Brzeski, an economist at ING in Brussels.
"Today's meeting and particularly the decision on the liquidity program shows that the ECB still does not trust the recovery and the health of the financial system," he added.
There have been mounting concerns recently about the pace of the U.S. recovery. Japan's economic outlook has darkened as the yen's rise pressures its exporters when its economy is barely growing, and there also have been signs of cooling growth in China.
Europe's economic rebound has largely been fed by a recovery in global demand. Eurozone exports grew by 4.4 per cent in the second quarter.
U.S. Federal Reserve chairman Ben Bernanke recently conceded that the Fed may have to back another round of monetary easing if the U.S. economy continues to weaken.
Regarding the U.S., Trichet said that "perhaps one has to be careful not to follow a mood which is a little bit too cyclical."
"What we see is more or less what we had in mind," he said. "We are not too much disappointed because we were not considering that it was likely to have growth which would be extraordinarily dynamic."
In Europe, "the odds still heavily favour the ECB keeping interest rates at one per cent through 2010 and very deep into 2011," Global Insight economist Howard Archer said. "The ECB is very aware that the eurozone's economy will be buffeted over the coming months by tighter fiscal policy increasingly kicking in across the region and likely slower global growth."
Earlier Thursday, Sweden's central bank raised its key interest rate by a quarter of a percentage point to 0.75 per cent, citing the pickup in exports and an improved labour market. Sweden is a European Union member but doesn't use the euro.
