ECB leaves rates on hold but moves to bolster banks

The European Central Bank (ECB) left interest rates on hold Thursday but launched a series of new emergency measures to counter the growing threat posed to Europe's economy and banking sector by the region's long-running debt crisis. Announcing the moves to boost liquidity for banks in the 17-member eurozone, ECB chief Jean-Claude Trichet indicated that the bank was in no rush to trim interest rates after it kept borrowing costs on hold at 1.5 per cent. Speaking at what his final monthly press briefing, Trichet warned that "the economic outlook remains subject to particularly high uncertainty and intensified downward risks." But he also insisted that "interest rates are low." Instead of cutting rates as some analysts had forecast, the ECB moved to reactivate steps it launched at the height of the world financial crisis in 2008. This includes reintroducing covered-bond purchases and year-long loans for banks amid concerns that the debt crisis could result in money markets freezing up again. The ECB's moves followed an announcement by the Bank of England in London that it was expanding its bond-purchase program to 275 billion pounds (420 billion dollars) and keeping borrowing costs at a record low of 0.5 per cent. The ECB's meeting in Berlin was held against the backdrop of signs of a worsening economic outlook for the eurozone, raising fears that the debt crisis could tip the currency bloc back into recession. The Frankfurt-based bank regularly holds out-of-town meetings. Thursday's meeting of the ECB's 23-strong rate-setting council was the last presided over by the 68-year-old Trichet. The head of the Bank of Italy, Mario Draghi, is due to take over from Trichet at the start of next month.