The European Central Bank is ready to use a bigger bazooka to jump start growth and inflation in the euro-area should its existing measures fail to have an effect, said Mario Draghi.
Reiterating his commitment to use "additional unconventional instruments", Mr Draghi said the ECB would also consider altering "the size or composition of our unconventional interventions should it become necessary".
Prices in the euro-area grew by only 0.4pc in August, raising fears that Europe is slipping towards a deflation trap experienced by Japan since the 1980s.
Earlier this month, the ECB cut interest rates to record lows and announced it would be buying private assets in a form of "quantitative easing lite" but has so far stayed away from conventional government bond-buying.
The Bank was dealt a blow earlier this month when its measure to get banks lending to the real economy - Targeted Longer-Term Refinancing Operations (TLTROs) - failed to attract much interest from Europe's lenders.
Mr Draghi denied Europe was experiencing a low growth and low prices trap, but said inflation expectations were likely to remain low until 2015 (see chart below).
"While inflation expectations have declined, particularly at shorter maturities, our measures will underpin the firm anchoring of inflation expectations in line with our aim of maintaining inflation rates below, but close to, 2pc," he said.
The bank chief also cited geopolitical events in Russia and Ukraine as having a negative impact on confidence in the currency bloc.
But speaking to a Lithuanian newspaper ahead of the country's entry into the euro, Mr Draghi said the benefits of membership outweighed any potential costs.
"The European “family” provides safety nets to partly offset the negative effects of geopolitical tensions related to Russia and Ukraine," he added.
The prospect of further quantitative easing has weighed down on the euro, which has fallen to a 22-month against the dollar.
There was some welcome news for the central banker, as data from August showed a modest growth in the money supply and slight upticks in lending to businesses and households.
These positive indicators of credit growth could be signs that the ECB's stimulative measures are beginning to have an effect, according to IHS Global Insight.
telegraph.co.uk
Reiterating his commitment to use "additional unconventional instruments", Mr Draghi said the ECB would also consider altering "the size or composition of our unconventional interventions should it become necessary".
Prices in the euro-area grew by only 0.4pc in August, raising fears that Europe is slipping towards a deflation trap experienced by Japan since the 1980s.
Earlier this month, the ECB cut interest rates to record lows and announced it would be buying private assets in a form of "quantitative easing lite" but has so far stayed away from conventional government bond-buying.
The Bank was dealt a blow earlier this month when its measure to get banks lending to the real economy - Targeted Longer-Term Refinancing Operations (TLTROs) - failed to attract much interest from Europe's lenders.
Mr Draghi denied Europe was experiencing a low growth and low prices trap, but said inflation expectations were likely to remain low until 2015 (see chart below).
"While inflation expectations have declined, particularly at shorter maturities, our measures will underpin the firm anchoring of inflation expectations in line with our aim of maintaining inflation rates below, but close to, 2pc," he said.
The bank chief also cited geopolitical events in Russia and Ukraine as having a negative impact on confidence in the currency bloc.
But speaking to a Lithuanian newspaper ahead of the country's entry into the euro, Mr Draghi said the benefits of membership outweighed any potential costs.
"The European “family” provides safety nets to partly offset the negative effects of geopolitical tensions related to Russia and Ukraine," he added.
The prospect of further quantitative easing has weighed down on the euro, which has fallen to a 22-month against the dollar.
There was some welcome news for the central banker, as data from August showed a modest growth in the money supply and slight upticks in lending to businesses and households.
These positive indicators of credit growth could be signs that the ECB's stimulative measures are beginning to have an effect, according to IHS Global Insight.
telegraph.co.uk
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