The European Central Bank resorts to one of its tried and trusted anti-crisis measures, announcing that it will offer a six-month tender of unlimited size next week. LONDON -- The European Central Bank resorted to one of its tried and trusted anti-crisis measures Thursday, announcing it would offer a six-month tender of unlimited size next week. At the same time, traders reported, the ECB re-opened its program of government bond buying for the first time in five months, although ECB President Jean-Claude Trichet didn't confirm that directly in his monthly press conference. In his opening statement, Trichet said the bank would keep its policy of lending unlimited amounts at its one-week, one-month and three-month operations until the end of the year. The ECB had not been due to decide its liquidity policy for the fourth quarter until next month. Trichet was coy about the re-opening of the Securities Markets Program, repeating merely that the program is "ongoing" and that "you will see what we are doing." As he spoke, traders in London reported that the ECB was in fact buying the government bonds of Ireland and Portugal, in what would be the first such intervention since March. The provision of unlimited funds over longer periods comes against a background of increasing stress in European financial markets, particularly in the form of speculation against Spain and Italy. However, the traders' reports suggested the ECB was still not prepared to start supporting the much larger Spanish and Italian debt markets. Reports of the bond purchases were enough to send the euro sharply higher against the dollar, after an initial dip at the start of the press conference. At 1300 GMT, it was trading at $1.4205, up from a low of $1.4151. Trichet gave no indication that the ECB would hold off from further interest rate rises in the near future, saying that policy is still "accommodative". He warned that risks to the medium-term price outlook "remain to the upside" and that "monetary liquidity remains ample and may facilitate the accommodation of price pressures." Trichet's assessment of the economic outlook was only slightly more pessimistic than the previous month's. "Continued moderate expansion is expected in the period ahead," he said. "However, uncertainty is particularly high." -By Geoffrey T. Smith, Dow Jones Newswires (+44 207) 842 9941; geoffrey.smith@dowjones.com (END) Dow Jones Newswires
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