FRANKFURT (AP) -- The European Central Bank cut interest rates a quarter point and said it would buy euro-denominated bonds as well as offer longer-term credit to banks as it moves to get more money flowing through the 16-nation euro zone economy.
ECB President Jean-Claude Trichet, in remarks to reporters after the bank lowered its benchmark interest rate to 1 percent on Thursday, unveiled the new measures to accompany already announced moves including increased credit amounts and broader collateral rules for banks that borrow from it.
Trichet said the central bank plans to purchase around euro60 billion ($80.2 billion) in euro-denominated covered bonds, which would grease the hard-hit banking system with more money in the midst of the world financial turmoil. He said details would come later.
The bank will also lengthen its short-term credits to banks through its refinancing operation to 12 months from the current six.
"We will display on the occasion of our next meeting all the technicalities that goes with this purchase of covered bonds -- which is highly technical," he told reporters.
Trichet said the bank could do still more, indicating that 1 percent may not be the lowest it could take interest rates.
"I will say, and it is something to be noted, that we have not decided today that the new level of our policy rates was the lowest level, that we could never cross whatever future circumstances could be," he said.
Covered bonds are securities backed by assets such as mortgages, but are considered safer than the asset-backed securities that have been at the center of much of the turmoil on world markets. Issuers must keep collateral on their books to back up the bonds, and creditors have more recourse in case of default, since they can seek repayment from both the collateral and the issuer itself.
Asked about other measures such as purchases of different kinds of securities -- which have already been undertaken by the Bank of England -- Trichet demurred. He said only that the bank had chosen covered bonds because they were one segment of the private securities market "that had been particularly touched" by the financial meltdown.