ECB chief indicates fresh interest rate cuts

"It is not a certainty, it is a possibility," he added.

If realised, the ECB's move would come as the second reduction of interest rates within one month, following a cut in early October from 4.25 to 3.75 percent, in a co-ordinated move with five other central banks, including the US Federal Reserve.

Before this synchronised action, the Frankfurt-based bank had not cut rates for more than five years, while the common step by several banks resembled a similar approach taken in September 2001, shortly after al-Qaeda's attacks on the US.

Analysts predict that the ECB will in November cut borrowing costs by a half percentage point and then further on in December and in 2009.

"Any new monetary policy stance that we could decide on at our next regular monetary policy meeting must continue to allow us to tell our 320 million fellow citizens: 'you can be confident. We will deliver price stability in line with our definition of less than but close to two percent in the medium term'," Mr Trichet said in Madrid.

Before his statement, the prominent Munich-based Ifo economics institute argued that the eurozone central bank has room to cut interest rates and should do so, referring to a downturn in corporate sentiment in Germany, which is at its lowest level in over five years.

German businesses are mainly concerned about the impact of lower exports due to weakened foreign demand.

Meanwhile, the head of the EU industry trade lobby, BusinessEurope's Ernest-Antoine Seilliere, told Bloomberg that up to 1 million people will lose their jobs in Europe next year due to the financial crunch.