FRANKFURT — In a surprise, the European Central Bank cut its benchmark interest rate to a record low Thursday, moving more quickly than expected to stimulate the euro zone economy in the face of falling inflation.
The E.C.B. cut its main rate to 0.25 percent from 0.5 percent, which was already a record low.
The central bank and its president, Mario Draghi, were reacting to a sudden drop in euro zone inflation, which fell to an annual rate of 0.7 percent in October, well below the E.C.B.'s official target of about 2 percent. The fall raised the specter of deflation — a sustained fall in prices that can destroy the profits of companies and the jobs they provide.
Many economists and political leaders will applaud the decision, which is likely to weaken the euro against the dollar and help European exporters.
European stocks were mixed on the news, with exchanges in Paris and Frankfurt initially up more than 1 percent and then falling flat, while the euro fell more than 1 percent against the dollar. A cheaper euro makes European products less expensive abroad.