The European Central Bank cut interest rates to a new low yesterday to boost the economy in response to a slump in inflation, while the United States clocked up surprisingly fast economic growth in the third quarter. Economic growth in the US accelerated by 2.8 per cent year on year in the quarter as businesses restocked shelves, but the slowest expansion in consumer spending in two years pointed to an underlying weakness. The GDP growth beat economists' expectations of 2 per cent. The ECB's governing council had faced intense market scrutiny after a shock slump in euro-zone inflation to 0.7 per cent last month - far below its target of just under 2 per cent. "We may experience a prolonged period of low inflation to be followed by gradual upward movements towards an inflation rate of below but close to 2 per cent later on," ECB president Mario Draghi said. The central bank said it would prime banks with liquidity for longer to prevent the euro zone's recovery from stalling. Calls from euro-zone government ministers and industry for the ECB to loosen policy to help bring down the euro's exchange rate had also heaped pressure on the council, although few analysts had expected a move this month. The ECB cut its main refinancing rate by a quarter percentage point to 0.25 per cent. It held the deposit rate it pays at zero per cent and cut its marginal lending facility - or emergency borrowing rate - to 0.75 per cent from 1 per cent. The euro fell sharply in response, while European shares and German government bond futures rose. Euro policymakers have played down the threat of Japan-style deflation, but appear to be taking no chances. Draghi said there was general agreement on the need to act but there were differences over when to act. In the US, details of the first estimate of third-quarter GDP were generally weak, with inventories contributing 0.83 of a percentage point to growth. Excluding inventories, the economy grew at a 2 per cent rate after expanding by 2.1 per cent in the second quarter, the Commerce Department said. Business spending growth slowed sharply, lending the report a weak tone and validating the US Federal Reserve's decision to stick to its US$85 billion monthly bond-buying programme. With near-term growth prospects not that bright, a reduction in the purchases, which aim to keep interest rates low, is not expected this year. "The Fed knows the calculation behind GDP and they will see the moderating trend, which is weaker than what the headline suggests," said Sam Bullard, a senior economist at Wells Fargo Securities. "They will take that into consideration. This is not a game-changer for people's forecast for fourth-quarter GDP and the Fed's policy outlook." Consumer spending, which accounts for more than two-thirds of US economic activity, expanded 1.5 per cent, the slowest pace since the second quarter of 2011. It grew 1.8 per cent in the second quarter. A separate report from the Labour Department suggested the jobs market continued to gradually improve. Initial claims for state unemployment benefits fell 9,000 to a seasonally adjusted 336,000 last week.