LUXEMBOURG, July 2 (Reuters) - European Central Bank President Jean-Claude Trichet signalled on Thursday that euro zone interest rates were unlikely to change for some time, and played down the risk of both deflation and above-target inflation.
"The current rates remain appropriate," he said after the ECB decided to keep rates at a record low of 1.0 percent.
Euro zone consumer prices fell 0.1 percent year-on-year in June, the first time the harmonised index has dropped since the euro's launch in 1999.
But Trichet dismissed the likelihood of serious deflation in the euro zone, and also played down the chance that inflation could quickly rise above the ECB's two percent ceiling.
"We expect the current episode of extremely low or negative inflation rates to be shortlived and price stability to be maintained over the medium term," he told a news conference in Luxembourg, after one of the two meetings held annually away from the ECB's Frankfurt base.
Trichet predicted a slow end to the euro zone recession next year. "Economic activity over the remainder of this year is likely to remain weak but should decline less strongly than was the case in the first quarter of 2009," he said.
"After a phase of stabilisation, a gradual recovery with positive quarterly growth rates is expected by mid 2010." (Reporting by Marcin Grajewski; writing by David Stamp; Editing by Andy Bruce)