|The ECB's decision to cut its main interest rate to 0.5pc from 0.75pc was widely expected by economists, and came amid signs that the eurozone crisis is still hurting the real economy. It also marks the first rate cut since last July.
The marginal lending rate, used as a last resort for banks unable to obtain funding at the wholesale market, was also reduced by 50 basis points to 1pc, while the overnight deposit rate was unchanged at 0pc.
"The ECB has made a concerted effort try to improve the transmission mechanism this month and get money flowing into the real economy," said Kathleen Brooks, research director at Forex.com. "This is a bold move for the ECB, since it is traditionally a cautious central bank."
However, other said cutting the main interest rate would do little to help distressed eurozone businesses, and called for more non-standard measures from the central bank to address imbalances in the euro-area. Speaking ahead of the ECB announcement, Marc Ostwald at Monument Securities, said:
"A refinance rate cut will do nothing to help the distressed peripheral economies (or indeed Germany), given the monetary transmission mechanism remains severely impaired; as such the ECB needs to find some further 'unconventional measures' to try and enhance the efficacy of a refi rate cut, and comments from various ECB officials last week made it clear that the process of coming up with such measures is by no means complete."
They also remained divided over whether ECB president Mario Draghi would announce any measures to help credit-starved small and medium-sized businesses, such as relaxing collateral rules, at a press conference on Thursday.
"We do not expect the ECB to introduce new non-standard measures today, in particular new tools to ease credit conditions for SMEs, but the Q&A session may shed some light on whether these measures are being discussed and what form they could take in a possible future implementation," said economists at Citigroup.
Official figures this week showed that eurozone unemployment hit another record high of 12.1pc in March while inflation fell to a three-year low of 1.2pc in April. The slowdown, driven by a sharp fall in energy prices, means inflation in the eurozone is now at its lowest level since February 2010, and well below the ECB’s 2pc target.