The European Central Bank (ECB) has cut interest rates by 25 basis points and decided to pump €60 billion (£52.7 billion) into the eurozone economy.
Interest rates now stand at 1% and the marginal lending facility was cut by 50 basis points to 1.75%.
The Governing Council will also embark upon an “enhanced credit support approach” where it buys euro-denominated covered bonds issued in the euro area to provide liquidity to the markets.
In his introductory statement this afternoon, Jean-Claude Trichet, president of the ECB, said: “These decisions have been taken to promote the ongoing decline in money market term rates, to encourage banks to maintain and expand their lending to clients, to help to improve market liquidity in important segments of the private debt security market, and to ease funding conditions for banks and enterprises.”
He added the decisions were made after considering economic data which revealed the first quarter of 2009 was weaker than expected and world economy is still undergoing a severe downturn.