The European Central Bank has cut the cost of borrowing to a new record low of 0.25 percent and said it could go lower.
Bank President Mario Draghi and his policymakers are focused on a slump in inflation; they are worried that that could cause the eurozone’s recovery to stall.
The ECB will also offer more money to banks at low interest rates.
Draghi told reporters: “Following today’s rate cut, the Governing Council reviewed the forward guidance provided in July and confirmed that it continues to expect the key ECB interest rates to remain at present or lower levels for an extended period of time.”
The move surprised many in the financial markets.
It followed months of grumbling by governments and bankers over the impact of a strong euro on the region’s fragile recovery and weak inflation rate.
Tthe euro fell sharply in response while European shares rose – particularly those of banks.
The International Monetary Fund and euro zone governments welcomed the rate cut.
Italian Prime Minister Enrico Letta said the cut showed “the ECB cares about growth and competitiveness in Europe” and that it would allow a “rebalancing” of the euro-dollar rate. The finance ministers of France and Ireland echoed that sentiment.