The European Central Bank (ECB) on Thursday cut its key interest rate by a half percentage point to 1.50 percent to counter the economic slowdown in the euro zone.

European Central Bank (ECB) President Jean-Claude Trichet speaks at a conference on financial regulation in Paris Feb. 23, 2009. The European Central Bank (ECB) on Thursday cut its key interest rate by a half percentage point to 1.50 percent to counter the economic slowdown in the euro zone. [Xinhua]

Besides the key rate, the ECB also cut the interest rate on the marginal lending facility by 0.50 percent to 2.50 percent and cut the interest rate on the deposit facility by half to 0.50 percent.

"Euro area real GDP contracted markedly in the fourth quarter of 2008, by 1.5 percent on a quarterly basis," ECB resident Jean-Claude Trichet said at a press conference.

"Available data and survey indicators suggest that economic activity in the euro area remained weak in early 2009." he said.

Trichet said inflation rates have decreased significantly and are now expected to remain well below 2 percent over 2009 and 2010,while both global and domestic demands would still decline in 2009,as the global slowdown becomes worse.

He stressed the importance of "an open market economy with free competition," saying "it is of the utmost importance to avoid protectionist measures."

"Refraining from protectionism will be key to allowing the global economy to overcome the current crisis more rapidly," he said.

This is the fifth time in six months for the ECB to cut rates to counter economic slowdown, sending the ECB's key rate to a record low.

Earlier in the day, the Bank of England (BOE), Britain's central bank, also cut its key rate by 0.50 percentage point to 0.5 percent.

Trichet has been reported to be reluctant to follow the lead of the Federal Reserve and the BOE, which have cut rates toward zero and turned to other policy tools, fearing the broad axe may bring a future crisis.

However at the press conference, Tricht said the governing council of the ECB was still "open to any measure" considering the uncertainty of future economic development.

(Xinhua News Agency March 6, 2009)