ECB keeps interest rates unchanged

FRANKFURT, Germany, July 2 (UPI) -- The European Central Bank left its key lending rate unchanged at 1 percent Thursday, a move anticipated by many economists.

In a prepared statement, bank President Jean-Claude Trichet said policymakers at the bank expected inflation to "remain dampened over the policy-relevant horizon." Policymakers also expected "a further deterioration in labor markets," he said.

An economic recovery was expected to be "gradual," he said, with a return to positive growth in the second quarter of 2010.

Trichet said stimulus spending could provide more of a boost than expected, but turmoil in the financial markets, rising commodity prices and "the intensification of protectionist measures" would have a continued negative effects on the economy.