The European Central Bank has resumed its buying of government bonds from the market and offered a new round of funding to commercial banks in response to a worsening eurozone debt crisis.
But analysts said the intervention was unlikely to ease market tensions for long, and some were worried by signals from ECB President Jean-Claude Trichet that official interest rates could rise further, which would put more pressure on weak economies in the region.
"The whole tone of the (bank's post-meeting) statement was still fairly hawkish," said Nomura economist Jens Sondergaard. "They are very concerned about inflation and to me it didn't seem that they are that concerned about the growth slowdown."
Trichet earlier told a news conference after the bank left interest rates unchanged that "we are experiencing a high level of uncertainty, not just in the eurozone".
The ECB's decision to resume its emergency bond-buying programme, which had been suspended since March, was a major step for the central bank.
Some of its policymakers dislike the programme intensely for compromising the ECB's core mission of controlling inflation, and Trichet acknowledged the decision to resume buying was not unanimous in the ECB Governing Council.
As he spoke, traders reported the ECB had entered the market to buy the bonds of Ireland and Portugal, pushing down their yields by about 0.2 percentage point at one stage. A European monetary source confirmed the intervention to Reuters.
But the source also said the ECB had no plans to buy the bonds of other countries, even though it was the rise of Italian and Spanish yields to 14-year highs this week that has alarmed policymakers.
This, combined with the equivocal way in which Trichet announced the buying, limited the impact of the intervention.
"I never said myself that (the programme) was dormant," Trichet said, adding that weekly ECB bond-buying data would show what actions had been taken by the central bank. "It is an ongoing programme and we are totally transparent."
The absence of an ECB intervention in Italy's bond market refocused attention on comments by Italian Economy Minister Giulio Tremonti, who earlier voiced frustration at the central bank's hands-off response to a selloff of Italian stocks and bonds over the last three weeks.
City A.M. Reporter