European Central Bank President Mario Draghi said on Thursday that the 17-nation economy is set to see gradual recovery later this year as there are already some signs of improvement.

Speaking at the post-decision press conference in Frankfurt, Draghi said, "Euro area economic activity should stabilize and recover in the course of the year, albeit at a subdued pace."

Earlier today, the Governing Council maintained the main refinancing rate at a record low 0.50 percent, in line with economists' expectations. The move came after a quarter-basis point reduction in May, the first rate cut in nine months.

The bank also held the marginal lending facility rate at 1.50 percent, following a 50 basis points cut last month. The zero deposit rate was also left unchanged.

"Our monetary policy stance will remain accommodative for as long as necessary," Draghi said. Such a stance, coupled with financial market improvements since last year, would "contribute to support prospects for an economic recovery later in the year", he added.

Answering questions from reporters, Draghi said policymakers did discuss the possibility of cutting the deposit rate below zero as well as measures to boost lending to small and medium-sized enterprises. However, such unconventional options are "on the shelf" for now, he added.

Further, he said measures to revive the market for asset-backed securities were also considered, but any action in this regard was "not for the short-term".

He also said there was a consensus among the policymakers today that economic data since May did not warrant a rate cut today. Apparently, the use of the term 'consensus' by Draghi suggests that the rate-setting body was not unanimous in today's decision to maintain status quo.

Draghi announced the latest ECB staff macroeconomic projection during the press conference. The single currency economy is expected to shrink 0.6 percent this year, which was slightly worse than the 0.5 percent contraction seen in March. However, the growth forecast for 2014 was raised to 1.1 percent from 1 percent.

The economic outlook faces downside risks that include the possibility of weaker than expected domestic and global demand and slow or insufficient implementation of structural reforms in euro area countries, Draghi said in a statement.

Inflation expectations remain firmly anchored in line with price stability, he said. Underlying price pressure over the medium term is expected to remain subdued, reflecting low capacity utilization and a modest pace of economic recovery.

The inflation forecast for this year was cut to 1.4 percent from 1.6 percent. The outlook for 2014 was left unchanged at 1.3 percent. The bank sees the risks to the outlook for price developments as broadly balanced.

Further, Draghi pointed out that the underlying pace of monetary and, in particular, credit expansion continues to be subdued. He also noted that the growth of loans to the private sector continued to be weak.

"Weak loan dynamics continue to reflect primarily the current stage of the business cycle, heightened credit risk and the ongoing adjustment of financial and non-financial sector balance sheets," Draghi said.

RTTNews