Europe’s central bank trims key interest rate

The European Central Bank could cut interest rates further and resort to alternative measures to fight the economic crisis after trimming the benchmark rate to its lowest point since World War II, its president, Jean-Claude Trichet, said Thursday.

Although the quarter-point cut to 1.25% on Thursday was smaller than most analysts had predicted, Trichet said he did not exclude the possibility, “in a very measured way, that we could go down from the present rate.”

He said the world and the euro zone -- which, with 330 million citizens, accounts for more than 15% of the global economy -- are in the midst of a severe economic downturn.

“Both global and euro area demand are likely to remain very weak over 2009 before gradually recovering in the course of 2010,” Trichet said.

He also said the central bank for the 16 euro-using nations would provide details of plans for more measures aimed to get banks to lend to one another. These could include the purchase of assets from banks to boost the amount of money in the economy, which both the Federal Reserve and Bank of England are doing.

Analysts said the central bank’s decision left markets disappointed.

The European Central Bank has been criticized in many quarters for not cutting interest rates as fast as the Fed and the Bank of England, even though inflation is below the target of just under 2% and the economies in the euro zone are contracting sharply. Lower rates can spur growth but risk boosting inflation.