The European Central Bank cut rates by half a point to a record low of 1.5 per cent and indicated that quantitative easing, sometimes referred to as "printing money", could be on the cards.

Jean-Claude Trichet, the European Central Bank chief, said that the Banks' governing council was studying possible "non-standard monetary measures", and added that nothing could be ruled out.

Mr Trichet also signalled that more rate cuts could be on the cards. “We did not decide ex ante that this was the lowest point that we could attain. Further decisions will depend on facts, figures, judgment on the basis of Governing Council discussions," he said.

This came after the Bank dramatically revised down its forecast for the economy of the 16-nation eurozone, saying that it would shrink by 2.7 per cent this year, down from its initial estimate of 0.5 per cent.

The forecasts, drawn up by central bank staff, said that output this year could range from minus 2.2 per cent to minus 3.2 per cent.

The Bank expects little recovery until 2011, seeing no growth in GDP at all next year, down from its previous forecast of 1 per cent.

Official figures published last week revealed the scale of the recession already gripping the eurozone. After shrinking by 0.2 per cent in the third quarter, the eurozone economy shrank by 1.5 per cent in the final three months of 2008, the deepest downturn in the bloc's 10-year history.

The Bank's battle with inflation also looks set to continue, as eurozone consumer price inflation is now well below the ECB's target of "close to but just below 2 per cent", and seems set to head down significantly further over the coming months despite edging up to 1.2 per cent in February from 1.1 per cent in January.

Mr Trichet gave little indication that there would be swift movement over the wrangling between eurozone countries about aid for Eastern European nations which have been hit hard in the recent quarter by the economic turbulence.

“On the Eastern European (question), I would say that at this stage our position would be that it is extremely important that we do not change any framework. We have rules, we have established I would say rules, whether for belonging to the ERM2 or for the euro, I would say that sticking to the rules as they are is very important for the stability of, I would say, the European Union as a whole," he said.

"I would say it’s not good to suggest that some are in such a weak situation that you would transform the rule for the sake of that situation. I trust really that it is important to stick to the present framework as it is."

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