The European Central Bank cut its benchmark interest rate by 50 basis points on Thursday, its fourth successive reduction, but indicated it would pause for breath in February.
The central bank cut to 2.0 percent, to match its lowest ever rate, in line with what markets and most analysts had been expecting.
President Jean-Claude Trichet told a news conference the recent flurry of rate cuts was not necessarily over, saying 2 percent was no floor for ECB rates and inflation risks would continue to diminish as the recession spreads.
But noting that February's policy meeting was only three weeks away, he said: "Our next important rendezvous for monetary policy will be our March meeting, where we will have substantial elements of new information."
Trichet said the euro zone economy was looking weaker than the ECB thought just a month ago.
Economic data and surveys since the ECB's last meeting pointed to a "further weakening of economic activity around the turn of the year, indicating the materialisation of previously identified downside risks to activity", he said.
The majority of economists in a Reuters poll had expected the ECB to take another 50 basis points from borrowing costs, although the level of uncertainty was unusually high.
Trichet hinted there was more to come.
"We didn't say that it was now the limit and we would not move any more," he said. "It is, in historical terms, a very low level but again, I don't say that it is the lowest point that is, in the view of the Governing Council, the appropriate one."
Economists also expect rates to drop below 2 percent.
"Unless data or equities or credit worsen from here, it's going to be hard to cut again in February. I would still go for (a cut of) 50 basis points in March," said Kenneth Broux, Lloyds TSB economist.
Other analysts said events were moving so fast they could not even rule out a February move, despite Trichet's remarks.
While rates at 2.0 percent match the lowest level in the 10-year history of the ECB in historic terms, they pale alongside almost-zero borrowing costs in the United States and Japan, as well as a British central bank thought to be heading in a similar direction.
FURTHER SLOWING
Trichet said the governing council expected a further slowing in the economy from ECB staff forecasts published last month, which saw the economy contracting between 0 and 1.0 percent in 2009. They will be updated for the March meeting.
"We said we were anticipating future bad news that we expect coming from the real economy and further alleviation then on the inflationary risks.
"We were taking into account a significant further alleviation of inflationary risks," Trichet said.
Thursday's rate cut was unanimous, Trichet said.
The euro fell against the dollar after the cut to a five-week low of $1.3074 <EUR=>, but rose slightly after Trichet's comments and was trading at 1.3100 by 1507 GMT.
Inflation in the euro zone has fallen rapidly in recent months and was 1.6 percent in December, compared with the ECB's goal of keeping inflation below, but close to 2 percent.
The bloc was confirmed as in recession late last year.
Economists expect inflation to fall further and some of them have warned of deflation danger, as falling prices could make already cautious consumers even more jittery and cut spending.
Trichet said he did not expect deflation to take hold but said inflation would fall in the first part of this to potentially very low levels, but then pick after mid-year.
