ECB returns to anti-crisis mode

The European Central Bank (ECB) yesterday decided to leave the main interest rates in the eurozone unchanged at 1.5 per cent as it started buying bonds of troubled economies.

Speaking after the bank’s monthly meeting in Frankfurt yesterday, the President of the ECB Jean-Claude Trichet indicated that the bank had re-opened its programme of government bond buying for the first time in five months.

Although he refused to confirm the decision officially, Mr Trichet said the programme was “ongoing”.

As he spoke, traders in London reported that the ECB was in fact buying government bonds of Ireland and Portugal, in what would be the first such intervention since March.

The bank’s actions come as the debt crisis threatens to spread from smaller, peripheral economies such as Greece and Ireland to the much larger and systemically more important economies of Italy and Spain.

With regard to the interest rates, Mr Trichet did not rule out increases by the end of the year to cool down growing inflation.

Admitting “a high level of uncertainty”, the ECB’s President said the eurozone’s economy was still expected to continue to grow, although at a moderate pace.