The European Central Bank is ready to use further unconventional policy tools if needed to stave off the risk of deflation and has asked staff to prepare them for use "if needed", ECB President Mario Draghi said today.
Euro zone inflation moved up to 0.4% in October but remains far below the ECB's target of just under 2%.
The persistently low rate underscores the difficulty of hitting that target in a stagnating economy.
The ECB has launched a series of policies to boost the economy and inflation but Draghi said there was a willingness to do more if necessary.
"The Governing Council has tasked ECB staff and the relevant Eurosystem committees with ensuring the timely preparation of further measures to be implemented if needed," Draghi told his monthly news conference after the ECB left interest rates at record lows.
Rates on the ECB's main refinancing operations, marginal lending facility and deposit facility were unchanged at 0.05%, 0.3% and -0.2% respectively.
Weak demand in September for the ECB's first offering of new long-term loans to banks, part of a plan aimed at fostering lending to companies, has raised expectations the ECB will eventually have to embark on further stimulus measures.
Meanwhile, the ECB aims to increase the size of its balance sheet towards the levels of 2012, ECB President Mario Draghi said today, repeating language that has annoyed some policymakers at the bank by essentially setting a target for the expansion.
Reuters reported earlier this week that some national central bankers were angered that Draghi effectively set a target for increasing the ECB's balance sheet immediately after the policymaking Governing Council explicitly agreed not to make any figure public.
Draghi said during a question-and-answer session on September 4 that the ECB aimed to expand its balance sheet "towards the dimensions it used to have at the beginning of 2012" at the peak of the euro zone crisis.
That implies a balance sheet level of up to €1 trillion higher than today's levels.
After leaving benchmark euro zone rates steady at record lows of 0.05% today, Mr Draghi said that: "Previously announced loans and asset purchases will have a sizeable impact on our balance sheet, which is expected to move towards the dimensions it had at the beginning of 2012."
Weak demand in September for the ECB's first offering of new long-term loans to banks, part of a plan aimed at fostering lending to companies, has raised expectations the ECB will eventually have to embark on further stimulus measures.
Meanwhile, the ECB aims to increase the size of its balance sheet towards the levels of 2012, ECB President Mario Draghi said today, repeating language that has annoyed some policymakers at the bank by essentially setting a target for the expansion.
Reuters reported earlier this week that some national central bankers were angered that Draghi effectively set a target for increasing the ECB's balance sheet immediately after the policymaking Governing Council explicitly agreed not to make any figure public.
Draghi said during a question-and-answer session on September 4 that the ECB aimed to expand its balance sheet "towards the dimensions it used to have at the beginning of 2012" at the peak of the euro zone crisis.
That implies a balance sheet level of up to €1 trillion higher than today's levels.
Mr Draghi said that: "Previously announced loans and asset purchases will have a sizeable impact on our balance sheet, which is expected to move towards the dimensions it had at the beginning of 2012."
The ECB's November policy meeting takes place against a backdrop of meager growth prospects for the euro zone, but little-to-no action is expected on further stimulus despite growing pressure.
The Paris-based Organisation for Economic Cooperation and Development today called on the ECB to live up to a promise "to do what ever it takes" to revive its economy and begin purchasing government bonds.
To keep the euro zone from slipping into deflation, the ECB has started pumping more money into the banking system through purchases of private debt and offers of long-term loans, aiming to boost its balance sheet by up to €1 trillion.
There is growing doubt whether its current measures will be enough, but the ECB is expected to wait until it gets a clearer view of the economy and the impact of its asset purchases and four-year loans to banks before adding further stimulus.
Many economists are already looking towards December when the ECB will update its economic projections.
ECB staff in September forecast growth of 0.9% this year and 1.6% in 2015, with inflation reaching 1.4% in 2016 - below its medium term target of just under 2%. Inflation stood at 0.4% in October.
ECB did not force Ireland into taking bailout - letters
When asked about the letters between former ECB president Jean-Claude Trichet and former finance Minister Brian Lenihan, ECB President Mario Draghi said that if people read the four letters released by the bank today, they will tell the whole story.
He said it was the Irish Government's decision to seek a bailout programme from the IMF and ECB, and the ECB did not force it into a bailout.
He said the letters show the sort of dialogue between the Government of 2010 and Mr Trichet.
Facing further questions on the letters, Mr Draghi said that he has said several times that it is a very big mistake to look at past mistakes with today's eyes.
Mr Draghi added that next year Ireland will be the fastest growing economy in the euro zone and so "the decision to enter the programme was not so stupid".
On whether Mr Trichet would attend the banking inquiry, Mr Draghi said that the bank "had not looked into that matter", adding that the ECB is accountable to the European Parliament and not necessarily national governments
Meanwhile, the Bank of England today also kept UK interest rates at their record lows of 0.5%.
