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By Sakari Suoninen
December 2, 2010 1:00 PM EST
The European Central Bank kept interest rates on hold Thursday at a policy meeting expected to see it keep unlimited liquidity operations in place for longer as the euro zone debt crisis rages unabated.
But the ECB is unlikely to announce mass new bond purchases at a 1330 GMT news conference, despite growing speculation that it could rush through new anti-crisis measures, including government bond buying on a much larger scale.
Analysts say the ECB may well have to do so if the likes of Portugal and Spain get no respite from the markets but most do not expect more than hints in that direction from ECB President Jean-Claude Trichet at the news conference.
"They will probably say something to the effect that they stand ready to increase purchases in government securities if they considered this necessary," said Frank Engels at Barclays Capital. "I think that would be slightly disappointing."
The euro was little changed versus the dollar after the rate decision, as were December Bund futures.
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The ECB started purchasing bonds through its Securities Market Program (SMP) in May and has so far spent 67 billion euros ($88 billion), most of it during the first three weeks of the program.
It has not said what it has bought or how much it intends to spend although traders say it increased Portuguese bond buys this week. Thus, it could hint at picking up the pace without a formal announcement of changes.
"Thursday's meeting could send the first signal that ECB is on course for stepping up its purchase program," RBS economist Jacques Cailloux said in a note to investors.
"We continue to look for 100 billion euros of purchase by beginning of next year including Spanish securities."
Others see much larger intervention -- Evolution Securities fixed income strategist Elisabeth Afseth said there could be a 1 to 2 trillion euro bond-buying program.
Debate will have been heated in the policy meeting.
Governing Council member Axel Weber has made his distaste for the program clear and called for it to be scrapped in October, saying it had failed to calm bond markets.
German Economy Minister Rainer Bruederle said Thursday liquidity would not solve the crisis and that pumping too much money into the economy risked creating new bubbles.
LIQUIDITY UNBOUND
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