The Bank of England’s Monetary Policy Committee cut its key interest rate by 50 basis points to an all-time low of 1% on Thursday, while the European Central Bank stood pat.

TD Economics said both central banks delivered on expections, and it sees rates heading lower still.

While the Bank of England cut rate, the Governing Council of the ECB left the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility unchanged at 2%, 3% and 1%, respectively.

These moves were expected by the market, TD observed. “For both central banks, the economic assessment remains fairly gloomy, with the sharp contractions in the fourth quarter of 2008 expected to continue in the early part of 2009,” it said.

The BoE’s committee said, “The global economy is in the throes of a severe and synchronised downturn. Output in the advanced economies fell sharply in the fourth quarter of 2008, and growth in the emerging market economies appears to have slowed markedly. Business and household sentiment in many countries has deteriorated. The weakness of the global banking and financial system means that the supply of credit remains constrained.”

It also noted that UK output dropped sharply in the fourth quarter, credit has tightened, and business has been cutting back on inventories, production, and investment, and cutting jobs.

The difference is their inflation outlooks, with the BoE expecting it to fall short of its 2% target, where the ECB sees it remaining in line with its target.

Nevertheless, TD expects both central banks to deliver more interest rate cuts in March, “with the risks tilted toward a 25 basis point cut by the BoE and a 50 basis point cut from the ECB,” although it says that a smaller cut from the ECB cannot be ruled out.