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STORY: The European Central Bank cut interest rates for the third time this year on Thursday (October 17).

It reduced the deposit rate by 25 basis points, to 3.25% - its first back-to-back cut in 13 years.

ECB President Christine Lagarde.

"The incoming information on inflation shows that the disinflationary process is well on track. The inflation outlook is also affected by recent downside surprises in indicators of economic activity. Meanwhile, financing conditions remain restrictive."

The move looks like an acknowledgement inflation could settle around the ECB's 2% target faster than thought.

A cut was widely expected as policymakers had made the case for quicker easing in the run-up to Thursday's meeting.

They cited a series of weak growth readings and stable inflation data.

Poor sentiment indicators, weak consumer spending and a prolonged industrial recession suggest the bloc is barely growing.

That has put downward pressure on inflation, which slowed to 1.7% last month, its lowest level in three years.

The ECB gave no clues about its next move, although markets expect similar cuts at each of its next three meetings.

Policy hawks are still likely to oppose quick rate cuts given inflation could tick up in the coming months.

They argue the labor market remains tight, energy costs are volatile and services prices are still rising quickly.

It suggests, in their view, domestic inflation could be relatively high for some time to come.

But doves argue growth is now so weak the ECB should act quickly to shore up the bloc.

They fear inflation could fall below target and the ECB would have to go from fighting rapid price growth to excessively low inflation.