ECB is going to buy covered bonds

In spite of estimating the world economy to remain in deep recession, the Bank of England keeps rates at 0.5% but lifts its bond-purchase total to 125 billion pounds ($189 billion) from 75 billion pounds. World trade is down an annualized 44% in the three months ending in February, according to the Netherlands Bureau of Economic Policy Analysis. The European Central Bank meanwhile cut interest rates by a quarter point to 1%, a new low for the Frankfurt-based central bank that sets interest-rate policy in the euro zone. The ECB is responding to an economy that may slump 4% this year, according to European Union estimates for the 16-nation region. The German economy, the euro-zone's largest, may shrink 5.4%. ECB President Jean-Claude Trichet said there were signs the economy was stabilizing at "very low levels" and didn't expect a recovery until next year. The ECB extended the maturity of its refinancing operations to 12 months from six months. Moreover, it has focused on providing liquidity to the banking sector by offering unlimited loans. But it didn't follow the Bank of England or the U.S. Federal Reserve in buying government bonds. Triched said the central bank would buy around 60 billion euros ($80 billion) worth of the securities. "There is considerable economic stimulus stemming from the easing in monetary and fiscal policy, at home and abroad, the substantial depreciation in sterling, past falls in commodity prices, and actions by authorities internationally to improve the availability of credit," the central bank said.