Eurozone crisis: ECB ups funds to banks

The European Central Bank (ECB) signalled on Thursday that it was buying government bonds in response to a deepening debt crisis as it also offered a new round of liquidity to banks.

The European Central Bank (ECB) signalled on Thursday that it was buying government bonds in response to a deepening debt crisis as it also offered a new round of liquidity to banks.

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But ECB president Jean-Claude Trichet also suggested that interest rates could rise further.

After the ECB decided at its monthly policy meeting to leave its main refinancing rate at 1.5%, Trichet said the bank’s bond-buying programme, which had been inactive since March, was still operational.

“I never said myself that it was dormant,” Trichet said. “It is an ongoing programme and we are totally transparent.”

Traders said they saw the ECB buying Portuguese and Irish government bonds in the secondary market as Trichet spoke, although not those of Italy and Spain, which have also been git hard by the debt crisis.

“They are in the market buying Portugal and Ireland right across the curve,” one trader said.

“I would not be surprised if before the end of this teleconference you will see,”said Trichet.