Interest rates were slashed on a historic scale across Europe on Thursday as central banks reacted aggressively to the sudden and brutal deterioration in the economic outlook since the autumn.

The European Central Bank announced a three-quarters of a percentage point cut in its main policy interest rate to 2.5 per cent – its largest cut ever – just hours after Sweden’s central bank surprised markets by reducing the country’s official borrowing costs by a record 175 basis points. The Bank of England slashed its rates by another 1 percentage point to 2 per cent, equal to the lowest rate since the central bank was founded in 1694.