ECB cuts rate to 1.0%

(Reuters) - The European Central Bank acted to soften a looming recession and avert a credit crunch in the debt-plagued euro zone by cutting interest rates on Thursday as European Union leaders prepared for a crucial summit.

The ECB cut its main rate by a quarter-point to a record low 1.0 percent as anxiety over the worsening sovereign debt crisis drowned out concern about above-target inflation.

ECB President Mario Draghi was expected to announce further action to support teetering banks with longer term credit at a news conference at 1330 GMT. He has signaled the central bank may act more decisively if an EU summit on Friday agrees to move towards fiscal union in the euro area.

European Commission Jose Manuel Barroso appealed to European leaders holding their eighth crisis summit of the year to put aside sharp differences to support their common currency.