The European Central Bank has cut its interest rate by 0.75%, its biggest ever move as inflation plummets and the Eurozone economy sinks deeper into recession.
The move takes the ECB's main refinancing rate to 2.50%, its lowest in nearly two and a half years.
It is the third cut in barely two months amid signs that the financial crisis is biting hard into the real economy.
Many commentators expect rates to fall further in the short-term, as the Eurozone moves deeper into recession.
The rate cut was modest compared with a 100 basis point reduction made by the Bank of England and a huge 175 cut by Sweden's central bank earlier in the day.
But Mr Trichet noted that it was the ECB's third cut in little more than two months, meaning that euro zone interest rates were now 175 basis points lower than they were in the summer -- a scale of cuts rarely seen in continental Europe since World War II.
'Inflation rates are expected to be in line with price stability over the policy-relevant horizon, supporting the purchasing power of incomes and savings', he told a news conference.
'The decline in inflation rates is due mainly to the fall in commodity prices and the significant slowdown in economic activity.'
Eurozone inflation plunged by 1.1 percentage points in November, the biggest drop since the Eurozone was created 10 years ago.
Some economists have talked about the threat of deflation hitting the Eurozone, where consumer prices fall across the board for a lengthy period, and can hit economies severely.
But Mr Trichet played down these risks, stressing that falling inflation rates did not equate to deflation.
