The European Central Bank cut interest rates by 75 basis points today, its biggest ever move as inflation plummets and the euro zone economy sinks deeper into recession.

The move takes the ECB's main refinancing rate to 2.5 percent, its lowest in nearly two-and-a-half years and marks the third cut in barely two months amidst signs that the financial crisis is biting hard into the real economy.

The majority of economists had expected a smaller, 50 basis point cut although a significant minority forecast a bigger move. Financial markets had priced in a 75 basis points reduction.

Other central banks have taken even more aggressive moves, with the Swedish central bank cutting by a record 175 basis points while the Bank of England cut rates by 100 basis points to two percent, their lowest level since 1951.

ECB President Jean-Claude Trichet is expected to justify the rate cut by pointing to the diminishing upside risks to inflation, which fell to 2.1 percent in November, and a contraction in domestic demand as well as tighter financing conditions. He will also unveil new staff economic forecasts.

The ECB also cut the rates on its overnight facilities by 75 basis points. Funds borrowed from its marginal lending facility would now attract an interest rate of three percent and overnight deposits will pay two percent.