ECB holds rates at 1 percent

By Krista Hughes

FRANKFURT (Reuters) - The European Central Bank kept interest rates on hold at 1.0 percent on Thursday and investors are now braced for signs that it will soon start weaning banks off cheap and abundant liquidity.

All 78 economists polled by Reuters last week had expected the ECB to leave interest rates at a record low this month, with no change expected until late 2010.

"Rates on hold was a given," said Unicredit economist Marco Valli. "We need to look for the news conference to have something more interesting."

ECB President Jean-Claude Trichet will hold a news conference at 1:30 p.m. British time. The euro was little changed after the decision at around $1.4877.

The U.S. Federal Reserve made no change to policy settings on Wednesday despite growing confidence of a recovery. The Bank of England also left its rates untouched, but said it would expand its quantitative easing programme by 25 billion pounds.

The vast majority of analysts expect the ECB to start withdrawing generous liquidity supplies before it raises rates, and futures pricing suggests market rates rising in early 2010.

Many of the emergency measures brought in to counter the financial crisis run only "beyond the end of 2009," meaning the ECB will have to decide soon whether to extend them or not.

Germany's Axel Weber fanned speculation that the central bank may reveal at least part of its hand on Thursday when he said last week that the policy of unlimited funds at main liquidity operations should be kept on, while very long-term liquidity operations could go sooner.