European Central Bank fights deflation with negative rates

The European Central Bank on Thursday entered into unchartered territory in its battle against deflation, taking one of its key interest rates into negative territory for the first time.

The European Central Bank cuts interest rates to an historic low of 0.15 per cent to spur economic growth and bank lending. (AAP)

The ECB says in a statement on Thursday that it is lowering all three of its key interest rates, which have been on hold at record lows all this year.

The bank's decision-making governing council voted to lower the central refinancing to 0.15 per cent from 0.25 per cent previously.

The interest rate on the marginal lending facility was trimmed to 0.40 per cent from 0.75 per cent.

And the deposit rate, the rate at which the central bank pays commercial banks for depositing their unused cash, was reduced from zero per cent to minus 0.10 per cent.

The moves had been widely anticipated by the financial markets after leading ECB officials, including president Mario Draghi, repeatedly hinted at such measures in recent weeks.

Draghi was scheduled to explain the bank's reasoning at a news conference later and was also expected to unveil additional policy measures to kick-start credit in the 18 countries that share the euro.