European Union: Eurozone consumer prices would barely grow this year,

Eurozone consumer prices would barely grow this year, damped by the sharp fall in oil prices, prompting the European Central Bank President Mario Draghi to deliver additional stimulus than what markets hoped, and policymakers expect euro area interest rates to remain very low for a long period of time as the bank signaled that there were limits to how much they can be reduced.

Draghi apparently pulled out all crisis-fighting weapons before on Thursday, as the ECB announced a slew of stimulus measures for the euro area economy, that included a cut to all three of its interest rates and an expansion to its investment purchase programme. The bank as well announced a new round of longer-term financing operations and decided to include investment grade non-bank deficit in its inventory of eligible assets for purchases.

In its policy session in Frankfurt, the 25-member Governing Council lowered its benchmark interest rate, the major refinancing rate, by five basis points to a record low zero %, while economists had expected the rate to be left unchanged.

The by presently-negative deposit rate was cut by 10 basis points to -0.40 %, in line with economists' expectations. The marginal lending facility rate was reduced by five basis points to 0.25 %, while economists had expected the rate to be held steady.

Further, the bank expanded the monthly purchases under the investment purchase programme by EUR 20 billion to EUR 80 billion starting in April. Economists were looking for an increase of at least EUR 10 billion.

Additionally, the bank announced a new series of four targeted longer-term refinancing operations, dubbed TLTRO II, each with a maturity of four years. These will start in June. Borrowing conditions in these operations can be as low as the interest rate on the deposit facility, the bank said.

"This comprehensive package will exploit the synergies between the different instruments and has been calibrated to further relieve financing conditions, stimulate new credit provision and thereby reinforce the momentum of the euro area's economic recovery and accelerate the return of inflation to levels below, but close to, 2 %," Draghi said in the introductory statement to his press conference.

Responding to question from reporters, Draghi said policymakers did discuss a multi-tiered deposit rate, but discarded that option as it was too complex for euro area and the bank did not want to signal that there was no limit to how low interest rates can go.

While acknowledging the risk of adverse effects of additional negative rates on bank profitability, Draghi said the ECB's experience with negative rates have been very positive.

Further, Draghi said there was an overwhelming majority of the rate-setters were in favor of the new stimulus package. "There was a very reassuring, positive, constructive discussion in the Governing Council," he said.

"The Governing Council expects the key ECB interest rates to remain at present or lower levels for an extended period of time, and well completed the horizon of our net investment purchases," Draghi said.

"It is crucial to avoid second-round effects by securing the return of inflation to levels below, but close to, 2 % without undue delay," he said.

Policymakers do not see the need to lower rates further, but such a stance can change if situations warrant, Draghi said.

Further, Draghi said if policymakers surrender to low inflation, again there will be deflation that raises the real price of deficit. The new efforts by the bank has proven that the ECB is not short of ammunition, but a solid recovery was needed for inflation to return to target, he added.

The March 2016 ECB Staff macroeconomic projections unveiled by Draghi revealed a sharp downgrade to the inflation estimate for this year to 0.1 % from 1 %. The projection for next year was lowered to 1.3 % from 1.6 %. Inflation is seen at 1.6 % in 2018.

The bank said the downgrade mainly reflected the fall in oil prices over recent months and inflation rates are expected to remain at negative levels in the coming months and to pick up later in 2016.

The euro area increase estimate for this year was lowered to 1.4 % from 1.7 %. The outlook for next year was cut to 1.7 % from 1.9 %. Increase was seen at 1.8 % for 2018.

The risks to the euro area increase outlook remain tilted to the downside and arise mainly from the heightened uncertainties in the world economy inclunding the broader geopolitical risks, the ECB said.

Investment purchases will continue until the end of March 2017, or beyond, if necessary, he said. The ECB as well raised the issuer and issue share limits for the purchases of securities issued by eligible international organisations and multilateral development banks from 33 % to 50 %.

Loan increase in the euro area remains very low, Draghi said. He hoped that the inclusion of non-bank deficit in the inventory of eligible assets for purchasing will further strengthen the pass-through of investment purchases to the financing conditions of the real economy.

"A bank that is very active in lending to the real economy, can borrow additional than banks active in other ways," Draghi said.

Regarding the new TLTRO II, Draghi said these new operations will reinforce the ECB's accommodative monetary policy stance and will strengthen the transmission of monetary policy by further incentivising bank lending to the real economy.

The ECB expects a "very sizeable take-up" of the TLTRO II given the economic recovery and the very attractive conditions, the central bank chief added.

In order to reap the full benefits from monetary policy measures, other policy areas must contribute decisively, Draghi reiterated. He as well urged all nations should strive for a additional increase-friendly composition of fiscal policies.