Mubasher: European Central Bank (ECB) President Mario Draghi has indicated that another round of monetary stimulus will be launched, as looming risks are building the case for action, The Financial Times (FT) reported.

“Additional stimulus will be required,” should economic outlook see no improvement, Draghi was quoted by the newspaper as saying in the ECB’s flagship annual conference in Portugal.

“Further cuts in policy interest rates and mitigating measures to contain any side effects remain part of our tools,” he said 

He noted that monetary policy is more effective and faster tool to attain its objective, especially in Europe, where public sectors are large, "with fewer side effects if fiscal policies are aligned with it."

Draghi reiterated his earlier message that the ECB had “considerable headroom” to extend the EUR 2.6 billion quantitative easing (QE) programme.

In addition, he hinted that the bank could over the near term target an inflation of above its medium-term goal of just under 2% for a little while.

The ECB president also asserted that any action by the ECB should be accompanied by more action from governments to ward off weak growth and low inflation.

 “If the crisis has shown anything, it is that we will use all the flexibility within our mandate to fulfil our mandate […] and we will do so again to answer any challenges to price stability in the future,” the ECB head noted.

Following Draghi's remarks, the euro fell against the US dollar following the remarks to $1.1185 at 9:08 am GMT, while German 10-year bond yields climbed to negative 0.300%.

By 11:26 am GMT, the EUR/USD pair fell by 0.21% to $1.1194.