The interest rate in the eurozone has been slashed to 0.25%, taking the markets by surprise.
The rate, set by the European Central Bank, is a new low and applies to its central, or main refinancing, rate.
It also cut the rate on its marginal lending facility, which offers overnight credit to banks from euro countries, to 0.75% from 1%.
The ECB did not change its deposit rate, leaving it at zero.
The announcement caused the euro to plunge against the pound and the dollar.
The move was seen as offering some help to the periphery countries within the eurozone.
Analysts believe the action was taken out of fear that the region could enter a period of deflation, as inflation fell to 0.7% in October which is the lowest it has been since the financial crash in 2008.
It has been deemed as a strong signal that the ECB is actively resisting deflation.
