UPDATE 1-ECB's Paramo: liquidity changes no hint on rates

BRUSSELS, Nov 10 (Reuters) - Moves by the European Central Bank to withdraw emergency measures put in place over the crisis should not be seen as a signal it will raise interest rates, Executive Board member Jose Manuel Gonzalez-Paramo said on Tuesday. "Our preparations for a gradual exit from these measures, however, do not suggest that fundamental change in policy is imminent," Gonzalez-Paramo said in the text of a speech to be given to a European Parliament committee. "The specific operational steps of an exit should not be interpreted as signalling imminent changes to key policy rates." ECB President Jean-Claude Trichet hinted last week the ECB would not extend 12-month refinancing operations beyond the one scheduled for mid-December. It is also still to decide whether to up the cost of those loans, a move which analysts argue would increase the chance of the ECB raising rates next year. Echoing Trichet, Gonzalez-Paramo also said the ECB's support measures would be taken away in a gradual and timely manner before they become a threat to price stability. He also raised two potential options of how the ECB could manage its 60 billion euro covered bond purchase plan. "There is no particular need to dispose of the purchased bonds at any future moment in time, as it does not interfere with monetary policy implementation." "We could therefore decide to hold the portfolio until maturity and let it gradually shrink over time as a result of redemptions. Alternatively, the portfolio could be disposed of in a gradual way that would make it possible to avoid market distortions," he said. Gonzalez-Paramo a member of the ECB's six-strong Executive Board also bolstered the growing view among policymakers that the worst was over in the economy. "There are some clear signs that the measures are having positive effects," Gonzalez-Paramo said, pointing to recent data improvements but at the same time stressing uncertainty remained high. (Reporting by John O'Donnell, writing by Marc Jones; editing by Patrick Graham) Keywords: ECB/GONZALEZ PARAMO ([e-mail]; [phone]; reuters messaging: [e-mail]) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved.

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