The European Central Bank held interest rates at 1 per cent as expected today after a torrid month in which it has abandoned resistance to buying government debt and flung its exit strategy into reverse.
The decision to keep rate on hold was widely expected. All 79 economists recently polled by Reuters had forecast the move and it elicited no reaction in both currency and bond markets.
Economists hoping for more detail on the ECB's purchases were disappointed as ECB president Jean-Claude Trichet refused to give any information about the €40.5 billion in bond purchases settled so far under the scheme.
Still, he gave no sign the ECB was retreating from the programme, which has caused a rift on the policymaking Governing Council, despite describing the step as temporary.
"We consider, at the moment I am speaking, that it is appropriate to continue to do what we have decided (and buy bonds)," Mr Trichet told the ECB's monthly news conference.
The euro rose to a session high against the dollar above $1.21 after he said the bond programme should not be viewed as a change to the monetary stance, which economists see remaining unchanged until the second quarter of 2011.
Mr Trichet brushed off questions about a 17 per cent fall in the euro on a trade-weighted basis in the last six months, saying the euro was credible and a good store of value.
"Trichet refrained from providing any additional information or colour on their asset purchases, de facto leaving all his doors open - and he declined several invitations to comment on the weaker euro apart from saying that it is a credible currency," Goldman Sachs economist Erik Nielsen said.
"It sounded as if he was pretty comfortable with both."
The ECB's sudden shift to bond buying abandoned a long-held resistance and came just four days after Trichet said buying bonds was not discussed at the ECB's last meeting.
The ECB had bought and settled €40.5 billion worth of bonds as tomorrow. But it has still given no hint of how much it is prepared to spend or how long it could buy bonds for.
"The market is clearly questioning the determination of the Eurosystem now, as country spreads are back to their widest in some cases - Spain, most noticeably," said Nomura economist Laurent Bilke.
Reuters