ECB makes record rate cut

By Jan Strupczewski

BRUSSELS (Reuters) - The European Central Bank made its biggest ever cut to interest rates on Thursday, lowering benchmark credit costs by 75 basis points as it forecast a gloomy year ahead for the recession-bound euro zone economy.

But ECB President Jean-Claude Trichet refused to give any guidance on whether more would follow after the latest cut -- the third in less than two months -- took the main interest rate to a 2-1/2 year low of 2.50 percent.

"I exclude nothing but I am not precommitting on anything," he told a news conference. "We will look at what is necessary at any time."

Thursday's rate cut, though big by ECB standards, was tame compared with a 100 basis point reduction made by the Bank of England, 150 points by the Reserve Bank of New Zealand and a stunning 175 points by Sweden's central bank earlier in the day.

These had fanned market expectations that the ECB would break with tradition and take a step up in its response to the economic problems now rattling the 15 nation euro zone.

ECB staff forecast the economy will contract in 2009 while inflation falls well below the central bank's 2 percent price stability ceiling.

Still, most economists had expected a smaller, 50 basis point step this month, especially given several policymakers had warned against large rate cuts in recent weeks.

One of those, Luxembourg's Yves Mersch, said the ECB was not planning to keep up the more rapid pace and would likely take a pause for the time being.