European Central Bank President Mario Draghi opened the door to tweaks in the bank's aggressive stimulus policy today.

His comments fuelled market expectations that the ECB will announce a reduction of stimulus as soon as September. 

But any change in the ECB's stance, which includes sub-zero rates and massive bond purchases, should be gradual as "considerable" monetary support is still needed and the rebound in inflation will also depend on favourable global financing conditions. 

"A constant policy stance will become more accommodative, and the central bank can accompany the recovery by adjusting the parameters of its policy instruments - not in order to tighten the policy stance, but to keep it broadly unchanged," Draghi told an ECB conference in Sintra, Portugal. 

His comments sent the euro 0.5% higher as investors took them as a signal the ECB was preparing to announce a cut in massive bond purchases as soon as September. 

With its €2.3 trillion asset buys running until the end of the year, the ECB will have to decide in the third quarter whether to extend or wind down the purchases, reconciling an apparent contradiction between healthy growth and weak inflation.

"Today Draghi moved his first step towards indicating that ECB monetary policy will become less accommodative in 2018," UniCredit economist Marco Valli said. 

"Unless an unexpected shock materialises, a formal tapering announcement is likely to come at the ECB monetary policy meeting scheduled on 7 September," he added. 

But Draghi also played down expectations for a speedy withdrawal of stimulus, suggesting that any normalisation will be drawn out. 

"There are strong grounds for prudence in the adjustment of monetary policy parameters, even when accompanying the recovery," he said. 

"Any adjustments to our stance have to be made gradually, and only when the improving dynamics that justify them appear sufficiently secure." 

Growth accelerating and holding firmly above trends argues for a reduction in stimulus but persistent labour market slack and commodity price shocks bolster arguments for restraint. 

Inflation has undershot the ECB's target of almost 2% for over four years but Draghi also hinted at a willingness to look through some of the factors holding down price growth. 

"While there are still factors that are weighing on the path of inflation, at present they are mainly temporary factors that typically the central bank can look through," he said. 

"All the signs now point to a strengthening and broadening recovery in the euro area. Deflationary forces have been replaced by reflationary ones," he added.

Europe's inequality highly destabilising - Draghi

Meanwhile, Europe's growing inequality is highly destabilising and needs to be tackled with education, innovation and investment in human capital, particularly jobs for young people, Mario Draghi said yesterday. 

Income inequality has grown among euro zone countries since the global financial crisis and some measures also show divergence between the bloc's richer and poorer members, a source of tension for the 19-member currency bloc. 

"Is this a seriously destabilising factor that we should cope with?" Draghi said in a rare town-hall style meeting with university students in Lisbon. "Yes it is." 

"We have to fight against inequality," Draghi in response to a student question. 

Draghi, leading one of Europe's most respected institutions, has for years called on governments to enact fundamental reforms, arguing that the ECB is able to prop up growth, but only temporarily, giving governments a window of opportunity. 

Eurostat data has shown that only a handful of countries have managed to shrink income inequality since the crisis while it has grown sharply in places like France or Spain. 

Figures also show the highest level of income inequality in the bloc's periphery, like Greece, Spain and Portugal, hit hardest by the crisis. 

Calling convergence among euro zone members "fundamental," Draghi said the best way to fight inequality is by creating jobs, which comes from an increased investment in education, skills development and innovation. 

He also called on governments to consider better income and wealth redistribution policies. 

Defending the ECB's ultra easy monetary policy, Draghi said that super low rates create jobs, foster growth and benefit borrowers, ultimately easing inequality.

He also rejected calls to exit super easy monetary policy quickly, arguing that premature tightening would lead to a fresh recession and more inequality.

Meanwhile, Europe's growing inequality is highly destabilising and needs to be tackled with education, innovation and investment in human capital, particularly jobs for young people, Mario Draghi said yesterday. 

Income inequality has grown among euro zone countries since the global financial crisis and some measures also show divergence between the bloc's richer and poorer members, a source of tension for the 19-member currency bloc. 

"Is this a seriously destabilising factor that we should cope with?" Draghi said in a rare town-hall style meeting with university students in Lisbon. "Yes it is." 

"We have to fight against inequality," Draghi in response to a student question. 

Draghi, leading one of Europe's most respected institutions, has for years called on governments to enact fundamental reforms, arguing that the ECB is able to prop up growth, but only temporarily, giving governments a window of opportunity. 

Eurostat data has shown that only a handful of countries have managed to shrink income inequality since the crisis while it has grown sharply in places like France or Spain. 

Figures also show the highest level of income inequality in the bloc's periphery, like Greece, Spain and Portugal, hit hardest by the crisis. 

Calling convergence among euro zone members "fundamental," Draghi said the best way to fight inequality is by creating jobs, which comes from an increased investment in education, skills development and innovation. 

He also called on governments to consider better income and wealth redistribution policies. 

Defending the ECB's ultra easy monetary policy, Draghi said that super low rates create jobs, foster growth and benefit borrowers, ultimately easing inequality.

He also rejected calls to exit super easy monetary policy quickly, arguing that premature tightening would lead to a fresh recession and more inequality.