The European Central Bank cut its benchmark interest rate by 25 basis points to a new record low of 1.0 percent on Thursday, as expected. But the ECB kept its overnight deposit rate, which is acting as a floor for money markets, at 0.25 percent, narrowing the gap between its policy rates instead of cutting the lowest of these to zero. The ECB also cut its marginal lending rate by 50 basis points to 1.75 percent, from 2.25 percent -- keeping the rate corridor symmetrical. The new rates will take effect on May 13. All 79 economists polled by Reuters had expected the ECB to cut the main refinancing rate to a new record low of 1.0 percent this month. Euro zone inflation is low and the economy is shrinking fast, although some data have shown signs of improvement. Analysts and markets are now awaiting President Jean-Claude Trichet's news conference at 1230 GMT, when he is due to announce whether the ECB will use more alternative policy measures to support the economy. The ECB is tipped to extend the maximum terms for its liquidity operations but could also follow other central banks into direct asset purchases. Markets are also keen to see whether Trichet will say that 1 percent is the bottom of the current rate cycle and if he signals that the ECB plans to keep rates low for some time.

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