Yesterday’s cut in eurozone interest rates, which coincided with the UK drop, may be the last for some months, the European Central Bank has warned.

The ECB met market expectations with a 1.75 percentage point cut to 2.5%, the lowest rate in more than two years and the third cut in two months.

Speaking after the decision, ECB president Jean-Claude Trichet said they now expected a recession in the eurozone next year, with the economy shrinking by between 0.5% and 1%.

“We see global economic weakness and very sluggish domestic demand persisting in the next few quarters,” he said.

The ECB slashed its 2009 inflation forecast from 2.6% to 1.4%, which is inside its target ceiling of less than 2%, and perhaps a bit lower than it would aim for.

But economists still expect more cuts next year, although Mr Trichet appeared to rule out another drop in January.

“With interbank rates of 3.6% still high relative to official interest rates, it is quite clear that further significant policy easing is required,” the AIB Global Treasury said in an analysis of the move.

“ECB rates need to be cut to very low levels to help bring down interbank rates, as has happened in the US.

“Otherwise, the easing of monetary policy is going to be less effective in this downturn.”