The decision was taken in coordination with central banks in Britain, Canada Sweden, Switzerland and the United States, the ECB said in a statement.
The ECB, which sets monetary policy for 15 EU members including Germany, also said that "the Bank of Japan expresses its strong support of these policy actions" although Tokyo did not take part in the joint action which followed unprecedented moves in Washington and London to battle the crisis.
Noting that "inflationary pressures have started to moderate in a number of countries, partly reflecting a marked decline in energy and other commodity prices," the ECB said it had also reduced its other two key rates by the same amount.
The ECB's marginal lending rate was cut to 4.75 percent and the interest rate on the ECB's deposit facility fell to 2.75 percent. These are rates at which commercial banks can borrow from, and place money on deposit with the central bank, respectively.
"Throughout the current financial crisis, central banks have engaged in continuous close consultation and have cooperated in unprecedented joint actions such as the provision of liquidity to reduce strains in financial markets," the ECB statement said.
Central banks have pumped massive amounts of cash into interbank money markets to ensure that the critical networks did not collapse, but their efforts have met with little success as the credit crunch continues.