The European Central Bank left its lending rates on hold at an historic low of 1 per cent Thursday amid market hopes that the ECB will outline new measures aimed at fighting off a debt crisis threatening the euro, DPA reported.
Indeed, the market focus is now on ECB chief Jean-Claude Trichet's press conference later Thursday to see whether the Frankfurt-based bank is prepared to take new action to stop the spread of the debt crisis from Greece and Ireland to other heavily indebted eurozone states.
After weeks of turmoil on European markets signs that tensions have eased emerged in the run-up to the ECB meeting.
While both shares and the euro gained ground, a calmer mood also prevailed on sovereign debt markets where investors' worries about high debt-and-deficit levels in parts of the 16-member eurozone have recently triggered an escalation in borrowing costs.
This includes heavily indebted Spain, Portugal, Ireland and Greece.
But after a 12-month bond from Portugal was well received Wednesday, Spain successfully sold 2.5 billion euros (3.3 billion dollars) of government debt Thursday.
Considered the guardian of the euro, the ECB is also likely to be forced to delay exiting the emergency liquidity measures introduced to underpin economic confidence in the 16-member eurozone.
Speaking to the European Parliament's Economic and Monetary Affairs Committee this week, Trichet made clear the euro will be defended at all costs.
In his remarks to the committee, Trichet raised the prospects of the ECB possibly expanding government bond purchase programmes, designed to help provide a liquidity boost for countries that need it.
He told the committee that the ECB's 22-head governing council would consider the programme when it met in Frankfurt Thursday.
Eurozone interest rates have now been on hold for 20 consecutive months.
This formed part of the bank's attempts to stabilize the currency bloc's economy in the wake of the global economic crisis that emerged following the collapse of the US investment bank Lehman Brothers in September 2008.
Many analysts also believe that the economic upheaval unleashed by the debt crisis means that the ECB could leave rates on hold for a protracted period.
At his press conference on Thursday, Trichet is also likely to again paint a moderately optimistic picture of the eurozone's economic outlook when he unveils the ECB's so-called staff projections, which set out new inflation and economic growth forecasts.
Analysts are expecting the ECB to upgrade its 2010 growth forecast to 1.7 per cent for 2010, from the 1.6 per cent it estimated in September.
And instead of 1.4-per-cent growth for 2011, the ECB is tipped to say that it now expects the eurozone to grow by 1.5 per cent that year.
The inflation projections are likely to remain unchanged at 1.6 per cent for 2010 and 1.7 per cent for 2011.
These are within the ECB's comfort zone of keeping inflation below - but close to - 2 per cent.
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