ECB lowers eurozone interest rates to 0.05%

The European Central Bank has cut its benchmark interest rate to 0.05%.

The ECB had earlier cut its rate from 0.25% to 0.15% in June, and also became the first major central bank to introduce negative interest rates.

After the latest news was announced the euro fell to a one-year low against the dollar of $1.3078.

The ECB has been under pressure to kick-start the eurozone economy, as manufacturing output has slowed and inflation has fallen to just 0.3%.

ECB President Mario Draghi had said after the ECB's last rate cut in June that "for all the practical purposes, we have reached the lower bound".

'Significant'

The new cut may be accompanied later by

further stimulus measures to boost the economy.

The benchmark refinancing rate determines what banks pay the ECB for credit, and affects what banks charge companies to borrow.

The central bank also cut its deposit rate, what banks pay to keep their money at the central bank, to minus 0.2% from minus 0.1%.

It is hoped that this measure will encourage banks to lend to business, rather than sit on their cash.

A news conference by Mr Draghi later may give more indicators about what else the bank might do.

He has indicated that the bank may buy large quantities of bonds if needed - known as quantitative easing.

"The cut to the deposit rate is significant and should further weaken the euro," said Aberdeen Asset Management Investment Manager Luke Bartholomew

"All eyes are now on the press conference to see if he will announce further measures to complement the rate cut."

BBC Business