The European Central Bank today cut its benchmark interest rate by 0.25 point to a new record low of one percent, as expected.

The ECB also cut its marginal lending rate by 50 basis points to 1.75 percent -- keeping the rate corridor symmetrical. The new rates will take effect on Wednesday.

"The rate decision was no surprise, but it is all about the language that will go with it," said Royal Bank of Scotland economist Jacques Cailloux.

"The question is whether they will provide indication if the door remains open for further cuts or whether they close the door entirely."

Earlier, the Bank of England kept its lending rates at a record low of 0.5 percent.

European Central Bank President Jean-Claude Trichet said the euro-zone economy was showing tentative signs of stabilising at a very low level.

Trichet said inflationary pressures had diminished in what remained a severe economic downturn.

"The latest economic data and survey suggest tentative signs of a stabilisation at very low levels after a first quarter which was significantly weaker than expected," Trichet told the news conference after the ECB's decision to cut rates.

"The world economy including the euro area is still undergoing a severe downturn with the prospect of both external and domestic demand remaining very weak over 2009 before gradually recovering in the course of 2010."

He also said inflation expectations remain firmly anchored and were consistent with keeping inflation in line with the bank's target of price growth at or just below 2 percent.

"The outcome of the monetary analysis indicates that inflationary pressures have diminished," he said.

Euro zone inflation is at a record low of 0.6 percent and although some economic data are showing signs of stabilisation, the European Commission this week forecast the euro zone's economy would shrink 4.0 percent this year. The ECB has cut rates from 4.25 percent since last October.