The European Central Bank cut its benchmark interest rate by three quarters of a percentage point Thursday, joining other central banks in lowering borrowing costs to try to ease the economic impact of the financial crisis.

The European Central Bank, meeting in Brussels, cut its so-called rate by 75 basis points — to 2.50 percent from 3.25 percent — to help restart economic growth and to ease the financing problems of banks. This is after earlier, the Bank of England reduced the key rate by 1 percentage point — to 2 percent from 3 percent — as it attempts to cushion the blow of an increasingly severe domestic recession.

 

That followed an unexpectedly large reduction just a month ago. Also Thursday, the Swedish central bank sharply reduced its main interest rate, in the first round of what was shaping up to be day of major moves by the global monetary authorities.

 

Even New Zealand's central bank on Thursday joined the flurry of deep interest rates cuts around the world, as policy makers rush to lower the cost of borrowing in a desperate move to bolster their falling economies.

 

In Stockholm, the Riksbank cut its main rate by an extraordinary 1.75 percentage points — its biggest reduction ever — to 2 percent. It said it had moved forward its rate decision by two weeks to ease the deteriorating employment situation and meet its 2 percent inflation target. The central bank Oct. 23 had cut its interest rate by half a percentage point to 3.75 percent.

 

The growing scale of the economic crisis was highlighted Thursday by announcements that both the Bank of England and Sweden's Riksbank also cut their interest rates aggressively, to 2 percent. In Britain, the bad economic news mounted just hours ahead of the central bank’s monthly rate-setting announcement. The country’s biggest mortgage lender reported that house prices in Britain fell at their fastest monthly rate in 16 years during November and a car industry update showing that new car sales fell 37 percent from a year earlier.

 

“They are pretty much signaling that they will go as low as zero,” said Jacques Cailloux, chief Europe economist at the Royal Bank of Scotland in London. “They will do anything they can to prevent any sort of vicious spiral through the economy. The E.C.B. has been much less vocal, but that might change.”

 

Since their last meetings in early November, when the ECB reduced rates by half a point and the Bank of England cut by a startling 1.50 percentage points, a raft of economic news has suggested a sharply deteriorating economic environment, diminishing price pressures and an ongoing reluctance by banks to resume normal lending to businesses and households. The European Central Bank, based in Frankfurt, has emphasized that, however bad the news, the economies of the 15 nations in the euro zone are not in a free fall. Bank officials have played down the prospect of deflation, or falling prices, a situation that would demand more rigorous intervention.

 

In Britain, the bad economic news mounted just hours ahead of the central bank's monthly rate-setting announcement with the country's biggest mortgage lender reporting that house prices fell at their fastest monthly rate in 16 years during November and a car industry update showing new car sales fell 37 percent from a year earlier.

 

Bank watchers are now debating whether the European Central Bank, which has sliced rates by a full percentage point since October, will not move more quickly. It has so far moved in increments of 50 basis points, but many analysts are expecting it will cut its key rate by 75 points, to 2.5 percent.

 

Since it last met, data confirmed that the euro area slipped into recession, commonly defined as six months of contraction, in the second quarter — a first in the 10-year history of the euro. Additional information, especially a widely watched index of survey of purchasing managers released, has underscored the rapid deterioration in the European manufacturing and retailing sectors, heightening fears that the contraction will deepen at year’s end.

 

A report Wednesday showed euro-zone retail sales plummeted by 2.1 percent in October from a year earlier.

 

Separately, New Zealand also reduced its key interest rate Thursday by a record 1.5 percentage points, to 5 percent, its fourth cut since July.

 

In comments that echoed the statements of other central banks, Alan Bollard, the New Zealand central bank’s governor, cited the “ongoing financial market turmoil and the marked deterioration in the outlook for global growth” as the reason for the latest aggressive policy move.

 

Indonesia’s central bank, meanwhile, unexpectedly lowered interest rates for the first time in a year to shield the economy from the global recession. Bank Indonesia reduced the benchmark rate to 9.25 percent from 9.5 percent.

 

The Swedish Riksbank’s move, far larger than the consensus forecast for a 1 percent cut, “highlights the degree to which the economic outlook has deteriorated,” Ben May, an economist at Capital Economics in London, wrote in a research note.

 

He predicted the Swedish economy would contract by 1 percent next year would expand by only 0.8 percent in 2010. As a result, Mr. May said, “we think that interest rates have further to fall and could reach 1 percent next year.”

 

The Federal Reserve has cut its target for overnight borrowing costs between banks, the Federal funds rate, to 1.0 percent, from the 4.25 percent at which it started 2008. However, because the Federal Reserve has been aggressively injecting cash into the money markets, the effective rate is actually much lower, about 0.25 percent early Thursday in Europe.

 

The Fed has also begun massive purchases of securities, a strategy designed to force banks to lend more money for investment and spending, rather than hoarding the cash. Known as “quantitative easing,” the method reflects a rising conviction that the central bank needs to lower interest rates across a broad spectrum of lending.

 

The Bank of England said its nine-member rate-setting committee had decided that there "remained a substantial risk" of inflation undershooting its 2 percent target in the medium term, an analysis that was the key factor in Thursday's decision.

 

The Swiss central bank, after cutting rates by a full percentage point on Nov. 20, effectively embraced this policy as well. “In the difficult circumstances that the Swiss economy is facing, our monetary policy has to be decisively expansive,” Jean-Pierre Roth, the central bank’s governor, said Wednesday.

 

The Bank of Japan cut its overnight rate to 0.3 percent on Oct. 31 from an already rock-bottom 0.5 percent. China has also lowered rates aggressively in a bid to safeguard the 8 percent growth rate that is considered essential for preserving employment and social stability. Thailand and Vietnam have lowered rates this week.

 

Many economists expect British interest rate to fall further in the coming months to 1 percent or even zero, either of which would take the rate to an all-time low — rates have never fallen below 2 percent since the Bank of England was founded in 1694.