The European Central Bank cut interest rates on Thursday to boost the euro zone economy, surprising financial markets by dropping its main refinancing rate to zero from 0.05 percent.

It also expanded its quantitative easing asset-buying program to 80 billion euros a month from 60 billion euros and cut its deposit rate to -0.4 percent from -0.3 percent, charging banks more to keep their money with the ECB.

The moves -- which knocked the euro down 1 percent against the dollar -- reflect the ECB's struggle with falling inflation expectations and worries about ultra-low price growth.

Attention now turns to ECB President Mario Draghi's 1330 GMT news conference when he is expected to unveil more details of the bank’s stimulus measures.

Expectations for a fresh shot of stimulus from the ECB had pushed down the euro and government bond yields earlier in the morning, after New Zealand set the bar high with a surprise rate cut that sent its currency tumbling.

It was the ECB’s second economic stimulus cocktail in three months, spurred by fears that low energy costs are feeding into wages and prices, potentially perpetuating ultra-low inflation.

The ECB has little to show for the 700 billion euros it has spent buying government bonds and other assets in the past year, as tumbling raw materials prices blunt the impact of its quantitative easing.

That raises the risk that people will lose faith in the bank's commitment to its mandate. Inflation has been below the ECB's nearly 2 percent target for three years and is likely to remain so for many more.

ECB President Mario Draghi has already said that acting too soon is better than acting too late, and that the rate meeting needs to recognize that the outlook for growth and inflation have deteriorated.

But with policy already deep in unconventional territory, the ECB has few big guns left and most remaining options risk either negative side effects or potential legal challenges

The ECB may take comfort in a relatively benign economic outlook. Growth in 2015 actually beat its expectation, consumption is holding up and German industrial production surged in January. A rebound in global markets since the lows of January is also a relief for the ECB, easing the need for a big move.

Oil prices are up more than 40 percent from early year lows and iron ore has risen 66 percent. Euro zone bank shares are still down 15 percent on the year but they are 20 percent above February lows, suggesting market sentiment has stabilized. ($1 = 0.9118 euros)