Jean-Claude Trichet, President of the European Central Bank at the European Parliament

Update : European Central Bank cuts benchmark interest rate by 0.25% to 1.0%

The Governing Council of the European Central Bank is expected to decide at its meeting in Frankfurt today to cut the benchmark interest rate from 1.25% to 1%. ECB President Jean-Claude Trichet will announce the Bank's position on likely new policy measures to deal with the Eurozone recession.

Markets view the expected cut today as the final cut in a cycle where the Governing Council has reduced the benchmark rate from 4.25% last October.

Trichet has flagged that the ECB will disclose today any new measures in response to the crisis as policy makers are reluctant to see the benchmark rate fall below 1%.

Bundesbank President Axel Weber and ECB Executive Board member Jürgen Stark have suggested that the ECB is highly likely to extend the maximum period commercial banks can borrow funds to up to 12 months from the current limit of six months.

Last week, the EU statistics office Eurostat said its estimate of annual consumer price inflation in the Eurozone in April was 0.6%, compared with the the ECB target of "below but close to" 2%.

The European Commission warned on Monday that the EU will suffer a deeper and longer recession than previously thought but the end of the recession is in sight.

In the past week, both confidence and PMI (Purchasing Managers' Index) Eurozone surveys signalling improved confidence and a slowing in the pace of the contraction, were published.

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Today's Governing Council announcement will be made at 12:45 pm Irish time. It will be followed 45 minutes later by a press conference hosted by Jean-Claude Trichet.