Frankfurt: The European Central Bank cut its benchmark interest rate by 50 basis points to a record low 1.5% on Thursday as the economy is diving and inflation is well below target.
The cut, in line with consensus forecasts, marks the fifth easing since October as the financial crisis is biting hard into the euro zone economy, which is already in recession, and inflation is expected to fall further.
All 78 economists in a Reuters poll had expected the ECB to cut rates, and all but two of them had forecast a half percentage point cut.
ECB president Jean-Claude Trichet will explain the Governing Council’s decision at a news conference at 1330 GMT. He is expected to justify the cut by pointing to diminishing upside risks to inflation, which was 1.2% in February, well below the ECB’s target of below, but close to 2%.
The ECB also set new rates for its overnight facilities. From 11 March, funds borrowed from its marginal lending facility will attract an interest rate of 2.5% and overnight deposits will pay 0.5%.