The European Central Bank cut its main interest rate yesterday, but opposition from a German representative in the bank’s inner sanctum highlighted the constraints to further action.

Facing diminished prospects for an economic recovery in the recession-bound bloc, the ECB cut its main refinancing rate by a quarter point to 0.50 per cent and Mario Draghi, ECB president, said the bank remained “ready to act if needed”.

In further dovish comments, Mr Draghi added that he kept an “open mind” about imposing negative interest rates, under which commercial banks would, in effect, be charged for depositing money at the central bank. The ECB president had previously expressed caution about the unforeseen consequences of such a move. The euro fell 1 per cent against the dollar to below $1.31.