The European Central Bank (ECB) cuts its key interest rate by 50 basis points to 2 percent on Thursday to counter the deepening recession.

The new rate will be effective from January 21. The deposit rate was lowered from 2 percent in December to 1 percent, while the marginal lending rate was kept the same as December, 3 percent, according to the ECB website.

Many analysts expected the rate cut as signs of deepening recession had become more clear, and as evidenced by recent bad economic data, according to Bloomberg.

The 2 percent matches the lowest rate since the ECB took charge of monetary policy in 1999.

ECB president Jean-Claude Trichet said in December that the bank was focused on making sure reductions flow through to the economy. It wants to avoid being "trapped" with rates that are "too low."

The ECB reduced its benchmark by 175 basis points in early October to fight recession caused by the world financial crisis.

Trichet will hold a press conference at 2:30 on Thursday to explain the reasons for the rate cut.

(Xinhua News Agency January 16, 2009)