The reduction, to 3.5 percent from 3.75 percent, comes as inflation has slowed and the bank faces pressure to bolster the region’s flagging economy.

With inflation subsiding, the European Central Bank is cutting its benchmark interest rate to prop up tepid growth with lower borrowing costs for companies and home buyers.

The ECB is expected to trim borrowing costs as its focus shifts from damping inflation to supporting the bloc’s faltering economy.

European stocks were higher Tuesday, as upcoming central bank meetings remained in focus. The pan-European Stoxx 600 index was 0.72% higher by 12:40 p.m. London time, with all major bourses and virtually all sectors in the green.