ECB President Mario Draghi said the latest drop was because inflation is expected to be low for a prolonged period of time.
“Accordingly our monetary policy stance will remain accommodative for as long as necessary,” he said.
Euro zone inflation fell to 0.7% in October, well below the ECB’s target of below but close to 2%.
The ECB cut its main refinancing rate to 0.25%. It held the deposit rate it pays on bank deposits at 0% and cut its marginal lending facility – or emergency borrowing rate – to 0.75% from 1%.
All but one of the 23 money market traders polled by Reuters this week expected the ECB to remain on hold at today’s meeting, pending a clearer view about where euro zone inflation is heading.
Since July, the ECB has said it expects to keep its key rates “at present or lower levels” for an extended period.
The ECB last cut rates in May. Meanwhile, the Bank of England kept UK interest rates at record lows of 0.5% earlier today.
Minister for Finance Michael Noonan welcomed the decision by the European Central Bank to lower interest rates.
Mr Noonan said Ireland’s model is export lead growth and the move will help the sector and the economy overall.
Mr Noonan said it will also help Ireland position in re-entering the markets.
He said: “It’s a good decision, we welcome it. We wanted interest rates to go down and it helps our position going back into the markets as well because the spreads in Europe should narrow now.”
Mr Noonan said today was an important one for Ireland as it marked the exit of the Troika.