ECB president Jean-Claude Trichet confirmed on Thursday that the European Central Bank would continue to buy government bonds of Eurozone countries. The ECB already bought government bonds of Eurozone countries worth 67 billion Euros. He did not offer any details as per BBC news.
Trichet said the ECB would continue to support troubled banks in Eurozone area. After Trichet’s announcement, the Euro rose to $1.3145 from $1.3059 on Thursday. ECB decided to maintain bank rate at 1%, as expected.
On Thursday (December 2), Spain government carried a bond auction to raise 2.47 billion Euros. Spain had to offer increased yield on its 3-year bonds, 3.7% instead of previous rate of 2.5% in October. Yesterday, Portugal also increased its yield on 1-year bonds from 4.8% to 5.3%. Markets are still nervous on public finances of Portugal and Spain.
Elsewhere, official figures confirmed Q3 growth rate of 0.4% for Eurozone, a slow growth compared with Q2 growth rate of 1%.
Yahoo | AFP | 31/10/2010
The European Central Bank governing council meets this week after European leaders moved to shore up eurozone stability and as the US Federal Reserve mulls a second round of monetary stimulus. The ECB is sure to maintain its main lending rate at a record low of 1.0 percent, analysts say, while focusing potentially tense talks on whether to continue unwinding its own unconventional measures.
A rift between ECB governors has opened over pursuing purchases of eurozone government debt, with German central bank chief Axel Weber saying he will stick to his guns even if it means passing on a chance to be the next ECB president. Weber insists the scheme should be phased out and said last week: "If that’s going to have implications for my future career, then I’d be happy to live with those consequences."
Commerbank economist Michael Schubert said: "Behind closed doors … the council is likely to discuss how to continue its gradual exit from unconventional measures" some eurozone banks have come to depend upon. "Discussions could become even more heated at Thursday’s meeting," he added.
Growth in powerhouse Germany is strong now but Greece is still in recession and faces an unsettled political situation that could worsen its debt crisis. In London meanwhile, the Bank of England is expected to maintain its main interest rate at a record low of 0.50 percent on Thursday.